GBP/USD Ranging at the Crossroads

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GBP/USD Ranging at the Crossroads

Bull Run Stalling: The GBP/USD has been bullish in February after making a low on the year in January and bottoming at 1.4950. It has rallied from that low to about 1.5480 last week, where it started to stall.

GBP/USD 1H Chart 2/24
gbpusd 1h chart 2/24
(click to enlarge)

Range: The 1H GBP/USD chart shows price in a consolidation range between 1.5315 and 1.5480. There is a slight bullish bias with the moving averages sloping up, but for this time-frame, we can say GBP/USD is mostly neutral. The RSI also shows lack of directional momentum as it oscillated from 70 to 30.

Bullish Breakout Scenario: Now, a break above 1.5480 should extend February’s uptrend. But price action started this week with a failed attempt. As we get into the 2/24 US session, price looks to be retreating back towards the middle of the range around 1.54. If price can hold above 1.54, forgiving a brief violation, there would still be bullish pressure towards 1.5480.

GBP/USD 4H Chart 2/24
gbpusd 4h chart 2/24
(click to enlarge)

Bearish Scenario: However, if price is dragged below 1.54 ,the pressure will return towards the 1.5315-1.5330 lows. Price could still be bullish in the short to medium-term if it holds above 1.53. The 4H chart shows that a break below 1.53 would complete a price top and break below a rising trendline, so it will introduce the bearish outlook. But as we will see in the daily chart, a break below 1.52 would be an even stronger sign of bearish continuation. In the 4H chart, it would clear below the 200-, 100-, and 50-period SMAs.

GBP/USD Daily Chart 2/24
gbpusd daily chart 2/24
(click to enlarge)

Bearish Continuation Below 1.52: The daily chart shows that if cable does hold above 1.53, it would hold above the 50-day SMA and maintain a bullish bias on the daily chart. However, if price falls below 1.52, it would break below the middle of the February price range, and put pressure back towards the 1.4950 area, with risk of continuing the prevailing downtrend.

Other Considerations: Also note on the daily chart that price is holding below a previous support pivot (in December). Also, the RSI is holding below 60, This shows bears maintaining control. Indeed it is the moment of truth. Will GBP/USD extend its bullish correction? Or will GBP-bears and USD-bulls revive cable’s bearish trend?

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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.