By: Colin Jessup
For 4 weeks in a row the Sterling has closed higher than its open after dropping from the high of 1.66180 the week of August 14, 2011, to the support level at 1.5350 at the beginning of October. This week the GBP/USD faces a major hurdle, the resistance zone of 1.5950 where price has historically had trouble getting through, both as support AND as resistance.
Last weeks candle is a Bullish Continuation Candle, indicating that prices may yearn to go higher, but it will face not only the previously mentioned resistance level, but also the daily and weekly EMA's at 1.5880 & 1.5990 respectively...plus the psychological hurdle of 1.6000 will also be a factor. We are also at the 50% retracement for the drop from 1.6618 to 1.5350, so factor that in as well.
From a daily stand point, I would be expecting price to falter, and possibly retrace to 1.5850 or 1.5775 support levels before pushing higher, but if not look for resistance at 1.5950, 1.6100 and 1.6270. Last Friday's Bullish Daily Candle did close above the EMA62, so that now become support at 1.5880, and is another indication that price may hold out for a loftier goal above.
I remain cautiously bullish on the Pound...
Happy Trading!
