GBP/USD Stalling after a Bearish Continuation Signal

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GBP/USD Stalling after a Bearish Continuation Signal

GBP/USD Resilience:

The sterling pound has been more resilient against the strength of the US dollar than other major currencies such as the EUR, the AUD, the JPY etc. GBP/USD is still bearish, but it has been in a consolidation mode recently, though it signaled bearish continuation by the end of last week.

Small Consolidation:
At the start of this week, the pair is trading in a small consolidation range between 1.6210 and 1.6261. The trend and momentum in the 1H chart looks bearish, but if price breaks above 1.6265, the pair would be in consolidation again, especially if the 1H RSI also breaks above 60.

GBP/USD 1H Chart 9/29
gbpusd 1h chart 9/29

(click to enlarge)

Bullish Correction Scenario:
Still, a break above 1.63 will be needed to open up a any bullish outlook because it will clear above a couple of falling trendlines. A push above 1.6340 will be needed to clear all the 200-, 100-, and 50-hour simple moving averages to bring more bullish bias.

However, if price rallies above 1.6265 but fails to break above 1.63, the GBP/USD is still in neutral-bearish mode with emphasis on the bearish part. Why? When we look at the 4H chart, we can see more technical reason to prefer the bearish outlook.

GBP/USD 4H Chart 9/29
gbpusd 9/29 4h chart

(click to enlarge)

Bearish Continuation:
After a sharp rally from 1.6052 to 1.6524, GBP/USD still held below the 200-period SMA in the 4H chart. The momentum was turned bullish, but only briefly. We saw price eventually break below the 100-, and 50-period SMAs, and break below a rising trendline. The RSI is also now pushing below 40, a sign that the prevailing bullish momentum is lost. Basically, we already have a bearish continuation signal at play.

Now, a break below 1.62 would further confirm the bearish continuation scenario, first with the 1.6052 low in sight, then the 1.60 handle in play after that.

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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.