Talking Points:
- The British Pound is recovering from a nasty sell-off that enveloped the Pound in the final week of September leading into the first week of Q4.
- GBP/USD has moved back above a key zone of resistance that runs from 1.3117-1.3187.
- GBP is a central part of the DailyFX Forecasts – Click here for full access.
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In our last article, we asked if the British Pound’s bullish trend was ready for continuation, and while it took a few days after that article for support to set-in, we may be nearing bullish resumption in Cable.
After an aggressive topside breakout showed-up after the September BoE meeting, GBP/USD ran all the way from sub-1.2800 in August to over 1.3600 by mid-September. The pair spent about a week trying to carve out a higher-low on a key Fibonacci level of 1.3478; but after continually failing to sustain a break above 1.3600, a bull flag began to form before support slowly gave way as sellers took over to drive prices back towards the 1.3000 psychological level.
GBP/USD Four-Hour: Retracement of Prior Bullish Trend Runs into Support Above 1.3000
Chart prepared by James Stanley
The U.S. Dollar received a quick gust of strength around last week’s Non-Farm Payrolls report; but after running into a key zone of resistance, sellers came back-in to the Greenback and this helped to bring GBP/USD higher. That move-higher has continued into the early part of this week, and at this point, GBP/USD is working with a couple of interesting permutations of resistance. We’ve already broken above the descending trend-line of the bearish move, and we’re now resisting the under-side of the 50% Fibonacci retracement of the August bullish move in the pair.
GBP/USD Four-Hour: Bullish Break of Bearish Trend-Line, Fibonacci Resistance at 1.3216
Chart prepared by James Stanley
The strength that’s shown-up in GBP/USD since the aftermath of last Friday’s NFP report has been rather smooth and consistent, riding along an aggressively-sloped bullish trend-line on the hourly chart (shown below in Blue). And while this could look attractive for bullish continuation, traders will likely want to wait for a bit of additional confirmation before looking to chase the move higher, as we have yet to cross the 38.2% retracement of the recent bearish move. With potential resistance running from 1.3267-1.3300, traders could wait for price to move into this zone to signal a greater probability of bullish continuation, at which point they could look to buy higher-low support around the 1.3200-1.3216 area.
Alternatively – traders can look to use inside price action by waiting for support to develop and hold around the zone that runs from 1.3175-1.3187. Each of these levels are derived from Fibonacci retracements, with 1.3175 being the 23.6% retracement of the most recent bearish move. If price action cannot sustain support above this level, the prospect of bullish continuation will look considerably less likely and bullish positions will no longer be favored.
Chart prepared by James Stanley
--- Written by James Stanley, Strategist for DailyFX.com
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