GBP Technical Analysis: GBPUSD Drops From Confluent Resistance
GBPUSD Technical Analysis Talking Points:
- It’s been a suspiciously quiet start to Q2 for the British Pound, as prices extended up to an area of near-term confluent resistance on Monday, which has held as prices have tilted-lower.
- The bigger question here is longer-term in nature: Will GBPUSD pose a downside break as price action has flipped-below a bullish trend-line that’s held the lows so far in 2019, and a bullish backdrop in the US Dollar may make that prospect of fresh bearish trends a bit more attractive.
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GBPUSD Falls From Confluent Resistance
It’s been a rather quiet start to Q2 for the British Pound. But, if the post-Brexit backdrop has taught GBP traders anything, it’s that complacency should be avoided as another burst of volatility may be around the next corner.
At this point, Brexit remains wrapped in opacity with no clear resolution in sight, and this is likely one of the reasons for a lack of significant vol in the British Pound of recent. But, as looked at previously, this context could remain as usable by short-term traders looking to take swing trades off of pre-defined support or resistance levels.
On that front, the Monday article entitled, GBPUSD Technical Analysis: Morning Star Bounce into Key Resistance, looked at one such zone. This area on the chart runs from 1.3181-1.3187, with the latter price functioning as the 23.6% Fibonacci retracement of the Brexit-move while the former is the 38.2% retracement of the 2018-2019 major move. This zone held a topside advance in the opening days of Q2 and prices have since tilted-lower, re-approaching the 1.3087-1.3117 area of prior resistance.
GBPUSD Four-Hour Price Chart
Chart prepared by James Stanley
Support Trend-Line Turned Resistance – Is This Foreshadowing a Bearish Move?
There’s a building backdrop to support the short-side of this scenario in GBPUSD, with the potential for continued pessimism around Brexit to go along with bullish potential in the US Dollar. Tomorrow brings Non-Farm Payrolls in the United States; and the US Dollar has been building into an ascending triangle pattern for the past few months. Should USD strength show around tomorrow’s NFP report, the 1.3000 area of support could soon come back into play in GBPUSD: And if buyers cannot hold the lows, fresh bearish trends may be back on the table.
Also supporting this thesis is the bullish trend-line that had held the lows in the pair for most of Q1. Prices saw multiple inflections off of this trend-line; but in the latter-days of March, bears pushed below and since then, that prior area of support has been holding as resistance.
GBPUSD Eight-Hour Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts 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.
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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.