GBP/USD Technical Analysis: Is This The Higher-Low?

GBP/USD Technical Analysis: Is This the Higher-Low?

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Talking Points:

• GBP/JPY Technical Strategy: Short-term bullish prospects after higher-high printed a week ago.
• GBP/USD has remained supported despite a continued rip-higher in the Greenback. Should USD-strength settle, Cable can be an attractive venue to look for USD-weakness.
• An analyst pick was issued on long GBP/USD earlier today.
• If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we looked at the continued top-side move in GBP/USD to ask whether a new trend was setting in. At the time, the pair had just set a new higher-high to test levels not seen since the ‘flash crash’ in GBP in early October; but it was the Bank of England’s pivot on inflation expectations in early November that has really created a situation that could bring on further gains for Sterling.

As we had written in our last article, traders would likely want to wait for support before looking to trade up-trend continuation, and given this week’s continuation of strength in the Greenback, the situation may have just presented itself. As the U.S. Dollar runs to fresh 13-year highs, the British Pound is remaining in a bullish structure on the 4-hour chart, highlighting the fact that while the Dollar has been rampantly strong, Sterling has been bid as well.

This sets up the scenario in which traders can look to trade the intermediate-term up-trend in GBP/USD by looking to take-on short-USD exposure while the currency is near long-term resistance levels. The current level of interest is the second zone of support that we had written about in our last article, using the ‘post-Flash Crash swing-high’ as a point of prior resistance/new support (highlighted in red below). Traders can look to cast stops below that zone, while targeting Fibonacci levels at 1.2513 and 1.2656 (also near-term swing-high), followed by 1.2750 (major psychological level).

Chart prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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