GBP/USD Technical Analysis: Fresh Highs After 'Brexit Ruling'
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- GBP/USD Technical Strategy: Intermediate-term mixed; Near-term bullish.
- After last week’s ‘Brexit speech’ from Theresa May followed by this week’s U.K. Supreme Court ruling on Brexit proceedings, Cable has run-up to fresh six-week highs.
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In our last article, we looked at the prospect of a bullish trend developing in Cable after Theresa May’s ‘Brexit Speech’ had driven the pair to fresh near-term highs. This, combined with the fact that bears were unable to break below 1.2000 from the previous down-side run opened the door to a possible bullish-continuation move in the British Pound. But after such an aggressive down-side move, it was difficult to decipher whether that bullish move was more of a short-squeeze or the legimate start of a new trend, so we focused-in on the support zone around 1.2250 to watch for a ‘higher-low’ to develop in the effort of trading top-side continuation.
Since then, that zone of support helped to form a near-term bottom in GBP/USD just ahead of this week’s U.K. Supreme Court ruling on Brexit, mandating that Theresa May is going to need parliamentary approval before triggering Article 50. After this news circulated through markets, GBP/USD ran up to set another fresh near-term high, signaling the more-likely prospect of bullish continuation.
At this stage Cable is trading at six-week highs after an aggressive run over the past week-and-a-half, and this can open the door to bullish trend-continuation strategies in the pair. On the chart below, we’re looking at the 4-hour setup in Cable to highlight this recent bullish structure.
Chart prepared by James Stanley
On the chart below, we drill-down to the hourly setup to look at relevant levels. Underneath current price action there are three support levels identified. ‘S1’ is near-term support in an approximate 50-pip zone from the Fibonacci level at 1.2543 down to the prior swing at 1.2490. ‘S2’ is set to an area of prior support that had also functioned as the ‘swing-high’ after the initial ramp after the Theresa May ‘Brexit Speech’. And just below that we have the same zone we had looked at for confirmation of bullish continuation around the psychological level around 1.2250.
On the top-side of Cable, bulls will likely want to take heed of the potential resistance from 1.2716-1.2775. This is an imposing zone of resistance as bulls were rebuked from breaking-above on three separate occasions in mid-December. This is an opportune area for bulls to tighten up risk, or to scale out of positions while moving stops to break-even.
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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