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GBPUSD: Cable Catches Support at Key Zone - Can Bulls Hold the Line?

GBPUSD: Cable Catches Support at Key Zone - Can Bulls Hold the Line?

James Stanley, Senior Strategist

GBP/USD Talking Points:

- The British Pound is continuing to give back January gains against the US Dollar.

- The support zone that runs from 1.2828-1.2850 helped to hold yesterday’s lows while leading into a bounce above the 1.2950 level. But USD-strength has come roaring back, and prices in GBPUSD look primed for a re-test of that support zone.

- DailyFX Forecasts have been published for Q1, 2019 on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Cable sellers have been snared at another area of key support on the GBP/USD chart. As looked at last week, the bullish move that showed in the pair through most of January’s price action had come under fire as sellers took control in February. Last week saw prices tilt below the key 1.3000 level in the pair. Sellers continued to push and on Monday of this week, the support zone looked at from 1.2828-1.2850 came into play, helping to cauterize the lows, at least for now.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

GBP/USD Levels

At this point, the January bullish trend remains vulnerable as prices remain near the 50% marker of that major move. Should prices fall below this level at 1.2828, the door could open to a deeper bearish move, targeting the next area of potential support that runs from 1.2671 up to 1.2735. The former of those prices is the 23.6% Fibonacci retracement of the ‘Brexit move’ in the pair, and this is a level that’s come into play on numerous occasions over the past six months; helping to set the August swing-low along with another similar instance in mid-January, just as buyers were re-grasping control of near-term price action in the pair.

On the resistance side of the coin, the 1.2920 area remains of interest, and a bit-higher on the chart, the 1.3000 area continues to loom large. That can be extended up to 1.3034, which is the 23.6% marker of last month’s bullish move. A test above that zone exposes the 14.4% marker of that same major move up to the 1.3117 Fibonacci level.

GBP/USD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

GBP/USD Strategy

As discussed over the past few GBP/USD technical articles, the fundamental backdrop around the pair at the moment can remain as a challenge. Brexit day is fast approaching and at this stage, nobody really knows how Brexit is going to shape up. And even if there was some indication of what the split might look like, it would be difficult to prognosticate exactly how that’s going to impact GBP price action: The past few months of chart evidence should prove that as a point. So, traders are likely going to want to concentrate strategy on GBP pairs to shorter-term scenarios, looking to implement favorable risk-reward ratios by looking for swings off of support and/or resistance levels.

Another item of importance to be contended with in the near-term is the US Dollar. The Greenback is jumping again today after yesterday’s pullback, and continued strength in the US currency can continue to constrain the topside of GBP/USD. Traders are likely going to want to be really careful with the 1.2828-1.2850 support level, as this area has already been tested and the next move there may not be met with the same response.

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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