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GBP/USD Breaks a Trendline and Tests Another

GBP/USD is showing early signs of a reversal this week.


(gbpusd 4h chart)

The 4H chart shows a few bearish signs:
1) A break below 1.6760 support pivot.
2) A break below the moving averages (200,100, 50)
3) A break below a rising trendline support that came up from the March low of 1.6455.
4) The RSI dipped below 30.

If the market is in bearish development, it is in the early stage. If we get a meaningful pullback that fizzes for example before 1.69, then bears will gain confidence, and open up the next support levels: 

S1: 1.6650
S2: 1.6545
S3: 1.6455

Also, if the RSI pulls back but fails to break above 60, then turns back down, it would reflect bearish momentum developing in this 4H chart.


(gbpusd daily chart)

The daily chart reminds us to respect the prevailing bullish trend. In fact, a rising trendline from Nov. 2013 is still intact. If the market can stay north of 1.67, the bearish scenario is not really developed.

Also, the daily RSI is still above 40, and unless it it dragged below 40, the bullish momentum is still intact in the daily chart. If the market pushes back above 1.6913, we are likely to have a retest of the year's high just below the 1.70 handle.