GBP/USD Technical Outlook
- At a pair of trend-lines, 200-day moving average
- General tone since May has been negative
- How things play out here could very pivotal
Cable has undergone a nice rally as of late, with it having risen over four figures off the September low. But that run is being put the to the test and depending on how it fares here soon it could continue to extend for some time, or turn back lower in-line with the general trend off the May high.
The trend-line running off the May high, August high, and 200-day moving average stand in near confluence with one another. This makes this area around 13800/50 a very interesting one. So far we are seeing price stall but that can change quickly.
If we see price turn down soon, then the upward channeling structure off the September bottom will come into play as a guide for confirming whether the trend lower off the May high will once again reassert itself.
Seeing price turn down from an intermediate-term level of resistance and then break short-term trend support is a nice technical combination. By waiting for the second part to occur (support break), traders can confirm that selling pressure is for real off the larger resistance level, and that it isn’t just a transient event that proceeds a breakout.
If the uptrend support line holds, then no short would be initiated and a loss can be avoided. There is of course no guarantee that support doesn’t break and GBP still rallies, but odds are at least stacked further in our favor. As traders, all we can do is stack odds, use stops, and let events unfold as they may.
On the flip-side, if GBP/USD can climb through the trio of resistance, then a broader rally may be under way, but there will quickly be levels to contend with in the 13900/14000 area. A strong breakout followed by a pullback/consolidation period would be ideal for a potential position in this scenario.
For the immediate future, in wait-and-see mode until we see what happens at this pivotal spot on the daily chart. It shouldn’t be too much longer, though, before we get some form of a resolution.
GBP/USD Daily Chart
GBP/USD 4-hr Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
