GBPUSD Support Turned Resistance (Nov 6, 2014)

After dipping close to the 1.5850 minor psychological support, price has pulled up for a retest of the area of interest.

The broken support zone lines up with the 38.2% Fibonacci retracement level and the 100 simple moving average. Stochastic is already in the overbought area and is starting to move lower, indicating that pound bears are taking control of price action. In this case, price could head back to the recent lows or perhaps create new ones.

MACD is moving higher though, suggesting that a higher pullback is still possible. Price could still retreat to the 50% and 61.8% Fibonacci retracement levels, which are near the 200 SMA. For now, the path of least resistance is to the downside, as the short-term SMA is moving below the long-term SMA.

An upside break from 1.6050 or the 61.8% Fib might indicate that the break was a fakeout and that GBPUSD could resume its climb back to the 1.6200 major psychological mark. Bear in mind though that services PMI came in weaker than expected for the UK yesterday, which is currently weighing the pound down.

Event risks for this trade today include the BOE interest rate statement, although no actual changes are expected.

By Kate Curtis from Trader's Way