The decline in the GBP/USD is approaching a level where two trend lines merge and could provide a technical level for a bounce higher.
Currently cable trades at 1.6200 but following the decline over the past two weeks momentum has shifted to the downside as shown by the falling weekly stochastics.
One area on the chart stands out as the GBP/USD has two merging trend lines near the 1.6050 level. The first trend line rises off of the May and December 2010 lows while the second trend line falls off of the November 2007 and July 2008 highs. The cable bounced higher from later trend line which turned into a support level as previous trend lines often do. Below this apex further support rests at the March low at 1.5935 followed by the late December low at 1.5340.
To the upside, should the bullish trend continue the GBP/USD would look to rise to this year’s high at 1.6750. A breach here and traders could expect the pair to rise to the August 2009 high at 1.7040.
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