GBPUSD Holding Support in British Pound Pullback: But for How Long?
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GBPUSD Talking Points:
- The British Pound has continued to give back late-February gains as last month’s breakout has continued to retrace. Current support is showing around the ‘s3’ zone looked at in the last GBPUSD Technical piece, and this helped to provide a bounce at which sellers offered resistance at prior support around 1.3187.
- Brexit continues to do the driving and with a scale-back of last month’s enthusiasm, the big question continues to revolve around aggressively buyers might respond and whether or not a longer-term trend may actually begin to form as Brexit-day nears.
- DailyFX Forecasts are available on a variety of currencies such as the US Dollar or the Euro and 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.
GBPUSD Breakout Pullback Continues
Volatility has continued to flow in the British Pound following the pair’s rather impressive showing in the second-half of February. As odds of a No-Deal Brexit began to diminish, so did many doom-and-gloom prognostications for the Pound, and prices in GBPUSD rallied all the way up to the 1.3350 level before finally beginning to pullback ahead of the March open.
March has brought a different tonality, however, and as discussed in the previous technical piece on GBPUSD, given the overbought nature of the move, prices were likely due for a pullback. The second zone of support looked at in that piece helped to hold last week’s low, which led to a gap-higher to start this week. But sellers weren’t yet done – and prices have driven down to the third zone of support around the 1.3117 Fibonacci level. That zone has helped to hold this week’s lows, at least so far, as prices bounced up to test short-term resistance at that prior area of support.
GBPUSD Hourly Price Chart
Chart prepared by James Stanley
GBPUSD Moving Forward
At this point, the big question is the same that I had posed in last week’s GBPUSD headline: How aggressive will bulls remain to be? And, as unfortunate as this is, the answer to that question is likely to be guided by the headlines in British media, which to those who have been following over the past few years since the 2016 referendum, could be qualified as ‘dizzying.’
As such, traders are likely going to want to continue along the lines of what’s been discussed in these pieces over the past few months: Keeping time of exposure limited, concentrating risk so that being ‘wrong’ on an individual setup doesn’t cause too much long-term damage to the trader’s account; and perhaps most importantly, basing strategy off of support or resistance levels that can allow for a limiting of initial risk outlay.
On the four-hour chart below, I’ve identified levels on either side of current price action that can be used for forward looking swing-strategy. The resistance area around 1.3187 can offer an element of confluence with the bearish trend-line taken from last week’s swing-highs, with a hold of resistance there opening the door for short-side strategies: A top-side break above this zone opens the door for targets towards prior support of 1.3231-1.3250.
Underneath current price action, the current support zone spans 1.3087-1.3117; but a push below opens the door for a test of the 50% marker of that February bullish move. Below that, the 1.3000 psychological level is confluent with the 61.8% retracement of that same Fibonacci study, and this can offer the potential for long-term support in the pair.
GBPUSD Four-Hour Price Chart
Chart prepared by James Stanley
To read more:
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--- 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.