The USD is wrapping up the week with a strong push across the board. Interestingly the EUR is staying resilient against this greenback attack. The GBP/USD however is retreating. Let’s take a look at the technical implications.
The 4H chart shows that price has been bullish since mid-March after GBP/USD made a new low on the year at 1.4564. It turned bullish in the 4H chart as price pushed above the 200-, 100-, and 50-period simple moving averages (SMAs), which started to slope up and turn into bullish alignment. The RSI has tagged above 70 and held above 40.
However, as price retreats from 1.5490, cable is starting to fall below the 50-period SMA, and the RSI has broken below 40. More importantly, traders will see GBP/USD break below its 2-week rising trendline. Therefore, the market will likely consider the bearish continuation scenario.
First, let’s monitor the 1.49-1.50 area. IF the market is still bullish, there is a good chance that traders will support cable above this area. Note that the 100-, and 200-period SMA also resides in this area, and a hold above them would reflect maintenance of bullish bias.
Now let’say say there is a bounce from 1.49-1.50, the inability to push above the 1.53 pivot would still keep the bearish outlook as the primary one.
A break below 1.49 should add weight to the bearish outlook, especially if the RSI in the 4H chart pushes below 30.
In the daily chart, we can see the significance of the 1.4950-1.50 area. This is a previous support/resistance area, and if the market rebounds from here, there would be a possible inverted head and shoulders pattern developing, with the shoulders around 1.4950, and with the neckline in the 1.55-1.5540 area.
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