FX.co ★ GBP/USD Intraday Technical Analysis & Trading Recommendations for January 23, 2012

Two weeks ago, GBP/USD declined rapidly towards 1.5233 to test the lower limit of the bearish channel marked on the chart.

Although it recorded a new low at the previously mentioned price level of 1.5233, it couldn't stabilize below 1.5278 showing a massive bullish reaction towards the lower limit of the channel.

Last week we mentioned, that we have an inverted 'Head & Shoulders' reversal pattern, as we had obvious closure above the neckline 1.5400 targeting to the upper limit of the channel.

We mentioned that the pair has a good resistance "Supply" zone between 1.5480-1.5540 and waited for bearish reaction towards it, which didn't happen.

Now the continuation of the current downtrend is counting on 1.5580-1.5600 (the most important resistance in the short-term). Otherwise, the pair may extend its bullish movement to higher levels starting from 1.5660.

This resistance area is a confluence of both a previous strong supply zone & the upper limit of the bearish channel marked on the chart.

Based on the previous analysis:

It's recommended to SHORT the GBP/USD currency pair anywhere around 1.5580-1.5600 according to your risk management.

SL should be located above 1.5675, & TP should be located at 1.5550, 1.5500, 1.5430 and 1.5360.