The greenback fell across the board last week after a slew of soft US data. The GBP/USD was able to bounce of up the low on the year at 1.4564 up to 1.5053. There was decent CPI data, and better than expected UM economic sentiment data on Friday, which helped cap cable’s gains at 1.5053.
The 1H chart shows the bearish reaction on Friday. It also shows the subsequent failure to push back towards 1.5050. Instead price action created the right shoulder to a head and shoulder’s pattern.
As we start a new week, price action attempted but failed to push above the shoulder and instead fell below the neckline, taking out a rising trendline with it as well. Meanwhile, the RSI which showed persistent bullish momentum in the short-term last week, has fallen below 40, which reflects loss of the prevailing bullish momentum.
The intra-session or near-term bearish outlook would be towards the 1.48-1.4812 support/resistance area. However if the market is not ready and pulls back, let’s watch the 1.4950 area for resistance. If GBP/USD holds under 1.4950 it would confirm a price top and add weight to the bearish scenario first towards 1.48-1.4812, then towards a support/resistance pivot at 1.47 before opening up the 1.4564 low on the year.
The 4H chart puts the levels discussed above in more perspective. We can see that price essentially cracked a common resistance around 1.50 but immediately retreated last Friday. Also note that the noted 1.48-1.4812 area contains a common support and where the 100-, and 50-period SMAs reside. A break below these moving averages would essentially revive the bearish bias. Also, the 1.47 pivot goes back to March. If price falls below 1.47 and the RSI below 40, we would already be in a bearish continuation scenario.
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