GBP/USD Faces a Risk of Reversal -British Pound to USD Price Forecast
GBP/USD Technical Analysis
GBP/USD Price – Multi Month High
Last week, GBP/USD geared up and jumped to a multi-month high. On Friday, the price closed the weekly candlestick with a 1.6% gain. Yesterday, Cable rallied to 1.3215 – its highest level in over eight months. However, the price declined later then settled below 1.3200 handle.
The Relative Strength Index (RSI) remained flat nearby 70 highlighting a slowing down bullish momentum.
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GBP/USD DAILY PRICE CHART (DEC 1, 2017 – DEC 11, 2019) Zoomed out
GBP/USD DAILY PRICE CHART (Mar 4 – DEC 11, 2019) Zoomed IN
From the daily chart, we notice on Wednesday GBP/USD rushed to a higher trading zone 1.3048- 1.3300. Yesterday, buyers rallied the pair to a multi- month high. However, the price declined on the back of taking profit operations.
It’s worth noting that, the price creates a high with a higher high meanwhile RSI creates a high with a lower high. This bearish divergence signals a possible reversal of uptrend move.
Thus, a close below the low end of the zone may lead more buyers to exit the market. This could send the price towards 1.2965. Further close below this level, opens the door for sellers to take charge and press towards the vicinity of 1.2785-75. Yet, the daily and weekly support levels marked on the chart should be watched closely.
That said, a close above 1.3300 handle may encourage more buyers to join the market and push GBPUSD towards 1.3382. Although, this rally could weaken at the weekly resistance levels underlined on the chart, as they offer attractive exit points for some buyers.
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GBP/USD Four Hour PRICE CHART (Oct 15 – DEC 11, 2019)
Looking at the four-hour chart, we notice that GBP/USD may be developing the right shoulder of a head and shoulders pattern. The possible neckline could meet at 1.3115 with the uptrend line originated from the Nov 27 low. In that scenario, the price falls and remains below this level Cable could press towards 1.3000 handle.
A break below 1.3095 may send GBPUSD towards 1.3058. Although, the daily support level underlined on the chart should be considered. On the other hand, a break above 1.3222 would negate the possible formation of head and shoulders and could send the price towards 1.3270. Nevertheless, the weekly resistance level underscored on the chart should be kept in focus.
See the chart to find out more about key levels GBPUSD would encounter in a further bearish /bullish scenario.
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Written By: Mahmoud Alkudsi
Please feel free to contact me on Twitter: @Malkudsi
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.