Conflicting signals can be seen on the GBP/USD 4-hour time frame based on the Ichimoku Kinko Hyo indicator. The pair is currently making a correction back to the resistance levels marked by the orange lines, which also happen to coincide with Fibonacci retracement levels.
Price is currently near the 1.6600 major psychological resistance, which is located between the first resistance level at 1.6571 and the second resistance level at 1.6610. This is also the 50% Fibonacci retracement from the swing high of 1.6750 and swing low of 1.6475. This suggests that the pair’s quick bounce might turn around these resistance levels, but much depends on the upcoming UK retail sales release.
GBP/USD Technical Outlook
A closer look at the other components of the Ichimoku Kinko Hyo technical indicator shows that an uptrend might be in the cards instead of just a simple retracement. After all, zooming out to longer-term time frames shows that the GBP/USD uptrend is still intact and the pair just bounced off a daily rising trend line. The green line crossed above the price, which is an early buy signal.
Aside from that, the red line is currently moving higher, indicative of trending market conditions. This line usually moves sideways when price is expected to range. Price is moving above the blue line as well, reflecting a market that is trending higher.
Further rallies could take the pair back up to the previous highs around the 1.6800 major psychological level. This might take place if the UK retail sales report shows a stronger than expected rebound versus the estimated 0.5% uptick. Meanwhile a weaker than expected figure or a negative one could spark a strong GBP/USD sellloff, possibly until the 1.6450 minor psychological support or to new lows at the 1.6350 dip.
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