GBP/USD Technical Outlook
- One of the tightest ranges you will ever see
- Range is breaking to downside, watch trend-line support
- A break out of the range may not be clean, need to be nimble
GBP/USD Technical Outlook
The sideways chop in GBP/USD over the past month has created one of the tightest set of trading conditions, ever. Looking at the size of the range on a percentage basis over the last 21 day (1.28%), you have to go back to 1995 to find a range matching what we have just seen. In 2014, on two occasions there were ranges just slightly bigger than what we just saw.
This should lead to a tradeable move soon.
Today, we are seeing cable start to decline out of the range and could be the beginning of a bout of volatility. It may not be clean, however, as often times breakouts from ranges aren’t – especially in cable.
There is reason already to be cautious on this initial break as strong slope support from May 2020 is just below current levels. This is also in confluence with horizontal support around the 14000-line, a level that runs over from the beginning of March.
Support could quickly forge a low and have GBP/USD running higher back inside the range towards the top of the range and beyond. Fake out breakouts (in this case, down then up) are often times the better result anyways as the market is caught leaning the wrong way. In this scenario, we would be looking for price travel back through the range and above 14251 to the 2018 high at 14376.
In the event the break we are seeing leads lower below horizontal support and the trend-line, then a short bias should begin to gain traction. The first level on the downside that would come into focus is a minor swing level at 13800, followed then by 13668.
All-in-all, GBP/USD’s historically tight range is unsustainable and should soon lead to some movement. It may not be clean at first, but there are some clear levels to watch as a guide regardless of whether the eventual move is up or down.
GBP/USD Daily Chart (tight range about to break)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
