GBPUSD looks prime for a pullback as price found support around the 1.5600 major psychological level. The pair appears to be retreating to the descending trend line visible on its 4-hour forex chart.
Stochastic has already reached the overbought area, indicating that the correction is almost over. The oscillator has yet to move lower before confirming that selling pressure is building up and that bears are ready to push GBPUSD back down.
The 100 SMA lines up with the descending trend line resistance around the 1.5800 major psychological level. The 200 SMA is slightly above the trend line and may be a good area to place a stop. MACD is still climbing though, indicating that there’s enough bullish momentum to trigger a test of the trend line.
If 1.5800 holds as resistance, GBPUSD might make its move back to the previous lows or probably create new ones. There are no major event risks for this GBPUSD setup today, as the U.K. has no top-tier releases lined up while the US only has the industrial production and capacity utilization reports due.
The path of least resistance is to the downside for this pair, as the BOE recently dumped its hawkish stance and clarified that they might not be able to tighten early next year. Meanwhile, the Fed is still on track to hike rates, as the latest retail sales figures came in stronger than expected. Consumer confidence has also improved in the US, setting the stage for strong demand later on.
A strong surge in risk taking, however, could lead to more gains for GBPUSD as it would draw support for the higher-yielding currencies. A break higher than the 1.5800 major psychological resistance might indicate that a move until 1.6000 is possible. On the other hand, a drop below the 1.5600 handle could lead to a test of 1.5400.
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