Daily Chart Art – May 11, 2011

GBP/USD: 1-hour

GBP/USD 1-hour Chart

Alright homies, I’ve got a question for ya’ll. What usually happens to a major resistance level when it breaks? It becomes potential support, of course! We saw this concept in action in GBP/USD yesterday, as it broke convincingly through the falling trend line resistance and used the same broken trend line as support later in the day. If you’re planning to ride the pair’s move up, keep a close eye on the 1.6400 region. That area could serve as a major resistance level, especially with Stochastic about to hit overbought territory.

EUR/CHF: 4-hour

EUR/CHF 4-hour Chart

We may possibly also see this “support turning into resistance” concept on EUR/CHF later too. As you can see, price had bottomed out at the 1.2500 major psychological level and is currently making its way to a previously broken support level. With Stochastic showing that conditions are overbought, look for price to potentially find significant resistance between the 50% and 61.8% Fibonacci retracement levels. If you’re bearish on the pair, the retest will be a good opportunity to sell the pair and jump in the overall downtrend.

GBP/JPY: 4-hour

GBP/JPY 4-hour Chart

Finally, let’s take a look at GBP/JPY. For the past couple of days, GBP/JPY has been subject to a lot of consolidations and breakouts. Price would trade within a very tight range, then suddenly break down and mark new lows. Since price is consolidating again, it could mean that the bears are revving up for another selling spree. Watch this pair carefully, as it could burst out of its range and fall 150 pips to the 130.00 level any time!

Before you get carried away with all these chart patterns and candlesticks, remember that technical analysis is only half the story. To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis.

Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Economic Roundup. Check him out, playas!