GBP/USD under Pressure below 100-Day EMA

GBP/USD (daily chart as of September 15, 2015) broke down below the 100-day EMA (bold blue moving average line on chart) on August 26 with a long bearish candlestick. This 100-day EMA has been serving as major support/resistance line since late February (red arrows from 1 to 6 on chart). On August 27, the pair also broke down below the medium-term uptrend line connecting the lows since early May (bold red trend line on chart).

Note that a potential head-and-shoulders pattern has emerged, with the May 14 high and August 25 high as the shoulders, the June 18 high as the head (gray shapes on chart), and the medium-term uptrend line or the 100-day EMA as the neckline. Current price is trading below the 100-day EMA. 

If the 100-day EMA remains as resistance, the pair could decline further to test 1.5170 level again, and potentially 1.4975 area. The potential projected target of the head-and-shoulders pattern is around 1.4880 level (if 100-day EMA as the neckline) or 1. 4790 level (if medium-term uptrend as the neckline). 

If price breaks out above the 100-day EMA and the medium-term uptrend line, it would invalidate the potential head-and-shoulders pattern. The pair could trade higher to test 1.5680, and then potentially 1.5815 level again. 

Support levels:

S1: 1.5170 (multiple lows)

S2: 1.4975 (multiple highs)

S3: 1.4790/4880 (projected target of potential head-and-shoulders pattern)

Resistance levels:

R1: 100-day EMA or medium-term uptrend

R2: 1.5680 (multiple highs)

R3: 1.5815 (August 25 high)

Upcoming event risks:

Wednesday September 16, 4:30am – GBP Average Earnings Index 3m/y

Wednesday September 16, 8:30am – CAD Manufacturing Sales m/m

Wednesday September 16, 8:30am – USD Core CPI m/m

Wednesday September 16, 6:45pm – NZD GDP q/q

Thursday September 17, 2:35am – JPY BOJ Gov Kuroda Speaks

Thursday September 17, 3:30am – CHF Libor Rate

Thursday September 17, 4:30am – GBP Retail Sales m/m

Thursday September 17, 8:30am – USD Building Permits & Unemployment Claims

Thursday September 17, 10:00am – USD Philly Fed Manufacturing Index

Thursday September 17, 2:00pm – USD FOMC Statement & Federal Funds Rate

Thursday September 17, 2:30pm – USD FOMC Press Conference

Thursday September 17, 7:30pm – AUD RBA Gov Stevens Speaks

Friday September 18, 8:30am – CAD Core CPI m/m