GBP/USD (daily chart as of May 29, 2014) retreated below
1.6820 again on May 27, and then touched the 100-day EMA yesterday but managed to
close right at the lower range of the support/resistance zone (1.6725-1.6820) mentioned in our previous analysis.
1.6820 is a key resistance level to watch. The pair has been
unable to clear it since February 16 (first red arrow on chart). Note that the
two overshoots (blue arrows) were considered failed attempts to clear 1.6820,
as technically, major breakout should be strong and should not return to its
prior trading range.
Today, the currency pair once again touched the 100-day EMA,
which has been serving as strong support since August 2013 (green arrows on
chart). Only a breach of the 100-day EMA would change the longer-term view of
the currency pair.
The UK’s improving economy and falling unemployment has
raised speculation about a possible sooner-than-expected interest rate hike. It
appears that the pound’s gains have priced in rate increase, and its rally
against the dollar is losing momentum.
Support levels below:
1st support: 100-day EMA
2nd support: 1.6650 (April 15 low)
3rd support: 1.6540 (April 4 low)
Resistance levels above:
1st resistance: 1.6820 (key resistance)
2nd resistance: 1.6995/7000 (May 6 high/psychology level)
3rd resistance: 1.7040 (August 2009 high)
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