GBP/USD Stalls at 1.6820 Strong Resistance

GBP/USD (daily chart as of April 16, 2014) broke out above the short-term downtrend line (line 1 on chart) and the previous resistance zone of 1.6670-1.6725 on April 8 with a strong bullish session, which invalidated a potential short-term head-and-shoulders pattern.

The pair is now testing strong resistance at 1.6820 for the second time after the first attempt on April 9. It found temporary support yesterday at 1.6650, right below the resistance (now support) zone. At this point, it is uncertain whether the breakout is confirmed.

Price needs to clear the 1.6820 mark to maintain the upside momentum. Otherwise, it could still face a potential decline to test the daily EMA 100. Keep in mind that the daily EMA 100 has been serving as major long-term support since November 2013 (three arrows on chart). Only a breach of the daily EMA 100 would change the longer-term view of the currency pair.

The pound has been the best performer among its peers in the past year with the UK’s improving economy and falling unemployment, which could lead to a sooner-than-expected interest rate hike from the Bank of England.

Support levels below:
1st support: 1.6650/70 (multiple lows and highs)
2nd support: uptrend line 2 or daily EMA 100
3rd support: 1.6450 (March 23 low)

Resistance levels above:
1st resistance: 1.6820 (major resistance)
2nd resistance: 1.6880 (November 2009 high)
3rd resistance: 1.7040 (August 2009 high)