GBP/USD Testing 1.6690 Key Support

GBP/USD (daily chart as of August 14, 2014) broke down below the important 100-day EMA on July 31. As mentioned in our previous analysis, the 100-day EMA has been serving as long-term support since 2013 (arrows from 1 to 5 shown on chart as support).

The pair is now facing a possible trend change, either to a downtrend or to a range. The projected Fibonacci retracement levels of the pair’s prior uptrend (from the high of July 31, 2014 back to the low of July 7, 2013) would be around 1.6630 (23.6%), 1.6285 (38.2%), and then 1.6000 (50%).

Current price is resting at 1.6690 level after dipping to a low of 1.6655, which is very close to the 23.6% retracement level of 1.6630. Note that 1.6690 is the last significant low point of the prior uptrend. Price may find support at this level. The 200-day EMA is now around 1.6710, also close to 1.6690.

Yesterday’s weak data from UK Q2 earnings growth showed the first contraction in four years. UK ten-year bond yields dropped to the lowest in a year as signs emerged that Bank of England may keep rates at record low for longer. Upcoming risk events include GDP report from UK scheduled to release tomorrow, and the CPI due on August 19.

Support levels below:

1st support: 1.6690/30 (May 29 low / 23.6% retracement level)

2nd support: 1.6450 (March 23 low)

3rd support: 1.6285/50 (38.2% retracement level / February 5 low)

Resistance levels above:

1st resistance: 1.6890 (August 5 high) or 100-day EMA

2nd resistance: 1.7000 (July 28 high / psychology level)

3rd resistance: 1.7190 (July 15 high)