Talking Points:
- GBP/USD tested a key support zone last week, but has since posed a 360+ pip rally.
- Retail traders are heavy on the short-side, with a current read of -2.03 via IG Client Sentiment.
- If you’re looking for longer-term analysis behind GBP and/or USD, check out the DailyFX Q1 Forecasts.
GBP/USD Sets Fresh Post-Brexit High
Last year turned out to be rather bullish for the British Pound, as the pair started trending-higher in the first quarter of the year and continued that upward advance into the close of 2017. During this time, a bullish trend-channel showed-up, and prices remained within that trajectory as we opened into 2018. Last week, we investigated a key area of support in the pair, revolving around the 1.3500 psychological level and aided in-part by a key Fibonacci level at 1.3478. This Fibonacci level is the 50% retracement of the ‘Brexit move’ in the pair, taking the June 2016 high down to the October 2016 low.
After a test of support last week, bulls took over, and have pushed prices up to fresh post-Brexit highs, with current resistance showing at the 61.8% retracement of that same Fibonacci study.
GBP/USD Daily: Bullish Trend Channel Defines the Trend
Chart prepared by James Stanley
Fibonacci Resistance a Hurdle for Bulls
Given that we’ve seen a rather aggressive leap from the 50% retracement of the post-Brexit move all the way up to the 61.8% retracement, buyers may want to utilize caution if looking to onboard additional long exposure at current levels. A bit of short-term support has developed over the past couple of days around 1.3750, and for shorter-term stances, this can be investigated as a jumping-off point for bullish continuation strategies.
GBP/USD Hourly: Short-Term Support 1.3750, 61.8% Fibonacci Resistance
Chart prepared by James Stanley
Moving Forward:
While the trend is undeniably bullish here, the primary reason for consternation is one of risk-reward. The past couple of days have seen a bit of support develop around the 1.3750 psychological level, but this is so far away from the previous zone of support or any other potential support variables that justifying risk-reward for longer-term bullish cases could prove challenging. Shorter-term approaches can look to near-term support for adding on bullish exposure, but outside of that, traders with longer-term horizons will likely want to wait for a cleaner setup to present itself before chasing the pair-higher.
To read more:
Are you looking for longer-term analysis on GBP/USD? Our DailyFX Forecasts for Q1 have a section specifically for GBP/USD. We also offer a plethora of resources on our GBP/USD page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.
--- Written by James Stanley, Strategist for DailyFX.com
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