GBP/USD Coiling with Bearish Continuation Bias

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GBP/USD Coiling with Bearish Continuation Bias

It is no surprise that after a pop from 1.4635 to 1.5165, the volatility in GBP/USD price action has quieted. The rally was a reaction after the FOMC meeting last week. It was NOT dovish, and the USD was able to be resilient after the initial reaction.The reaction in GBP/USD was unable to extend in both direction and volatility.

GBP/USD 4H Chart 3/23
gbpusd 4h chart 3/23
(click to enlarge)

In the 4H chart, we see that although cable broke above the 50-period simple moving avearges (SMA), it is still holding below the 100-, and 200-period SMAs. Furthermore, the 4H RSI is still holding below 60, which reflects maintenance of the prevailing bearish momentum.

In the daily chart we can see that the pair is also still bearish based on price action, the moving averages, and the RSI. In fact, price holding below a support/resistance pivot area around 1.52 was an indication that bears are still in charge.

Let’s see what happens around the 1.50 psychological level. If the market is able to hold GBP/USD under this level through the 3/23 session, we should see pressure back towards the 1.47 handle down to the 1.4635 low on the year. In this scenario, with the prevailing downtrend intact, there is a good chance cable will extend even lower towards 1.46 before the week ends.

GBP/USD Monthly Chart 3/23
gbpusd monthly chart 3/23
(click to enlarge)

When we look at the long-term, monthly chart we can see that cable is keeping the bearish bias developed during the onset of the global financial crisis. After a false bullish breakout in 2014, where price eventually retreated back below 1.70 and the cluster of 200-, 100-, and 50-month SMAs, price has cleared lows not seen since 2010. The 2010-low is 1.4226, so the short-term bearish continuation target to 1.46 is well well above this key support.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.