GBP/USD Technical Analysis: Cable at Support Presents Reversal Setup
- GBP/USD Technical Strategy: Flat, Long position in last article met first two targets.
- The Cable put in a massive move lower last week, driven in-part by the interest rate hike out of the Federal Reserve.
- If you’re looking to filter trends in GBP/USD, SSI can help, and we’ve just rolled it out in a real-time format.
In our last article, we looked at a reversal setup in GBP/USD using the vaulted 1.5000 psychological level as support. And after some slight deviation against the move, the pair eventually throttled higher, taking out the first two profit targets. But last week was brutal for the Pound, and that move higher did not continue. Each of the five days of last week saw the Sterling sold against USD, and we’ve opened up this week at another significant support level that stemmed the bleeding from last week’s declines.
The level in question is at 1.4884, which the 76.4% Fibonacci retracement of the most recent major move, taking the April low to the June high. Just above this at 1.4910 we have another Fibonacci level, which the 61.8% retracement of the ‘secondary move’ in the pair, taking the Financial Collapse low to the 2014 high; and the confluence of these two Fibonacci levels after a huge move lower may provide enough impetus for top-side reversal plays in the week ahead.
The low from last week is at 1.4863, but with prices only ~20 pips away, that level may be too tight to position-in for a swing trade. And until we get down to the next major psychological level at 1.4750, there aren’t any obvious levels of support with which to base a well-thought out stop. But, given that this setup is based around the premise that resistance may hold at ~1.4875, traders could cast that stop down below 1.4850, 1.4825 or 1.4800 based upon how aggressively they wanted to treat the move.
On the top-side, profit targets could be appropriated at 1.5000 (major psychological level), 1.5084 (61.8% retracement of the most recent major move), 1.5184 (23.6% retracement of the ‘tertiary move’), and then 1.5250 (major psychological level).
Created with Marketscope/Trading Station II; prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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