GBP/USD Technical Analysis: Cable Poses a Bullish Run
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- GBP/USD Technical Strategy: Longer-term bearish trend still in-tact with price action below 1.3371.
- The past week has seen considerable bullishness in GBP/USD as USD has continued to weaken; retail positioning has flipped short, and this is a bullish indication in GBP/USD.
- SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.
In our last article, we looked at GBP/USD in the midst of another turn lower. But as we warned, this market was looking quite oversold, and traders looking to voice a bearish bias on the pair would likely want to wait for a cleaner setup or more attractive risk-reward ratio before looking for continuation of that down-trend.
Since then, GBP/USD set higher-low support at 1.2864; above the post-Brexit low of 1.2788, and this was after the bazooka of stimulus posed by the Bank of England from the prior week. This opens the door for an extended top-side move as the repercussions of the Brexit-move in the Sterling have begun to show in British data; and that’s primarily speaking to the prospect of continued inflationary pressure brought upon by the out-sized move lower in the British Pound. With a weaker Sterling, import prices will likely be moving up in the U.K., and this can continue to prod inflationary pressure that may complicate future rate cuts that the Bank of England might be investigating. So the fundamental back-drop could certainly support a continued move higher here in GBP/USD, and this could give caution to shorts or those carrying a bearish bias in the near-term.
However, the longer-term bearish structure is still intact with price action below 1.3371, which was the prior swing-high on the Daily chart of GBP/USD. Just 14 pips below is the 76.4% retracement of the post-Brexit move in the pair, and this is just another reason to watch for price action’s response should this level come into-play. This could be an interesting zone to evaluate for potential bearish reversals of the near-term move higher, or, on the other side, for continued reversal plays should price action eclipse this level.
For traders looking to initiate a bearish stance on the Cable, they can watch for resistance to form around this price zone from 1.3350-1.3375 in order to look for that short entry. But for those looking to play the up-side of the pair, letting this level first break to prove continued bullishness could provide confirmation that buyers may be able to continue pushing price action higher. For that approach, the major psychological level, and the ‘Financial Collapse’ swing-low at 1.3500 could become an attractive near-term target.
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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