GBPUSD, Monthly
GBPUSD has been falling for several months as markets have been adjusting to changing interest rates landscape that has lately been favouring the USD over the pound. Markets have also been worried about the approaching referendum that could lead to Britain exiting the Eurozone. Polls have been suggesting that opinion is more evenly divided than previously thought, though the UK government is still negotiating with EU partners for better terms.
After hitting a 50 month SMA in June 2015 the pair has now fallen to levels that attracted buyers in April 2015. These levels have been turn around areas also in 2010 and indeed in 2009 when market created an important bottom over a three to four month period. In monthly timeframe Stochastics (7) is oversold while RSI (7) indicates is right at the threshold of the oversold level. The nearest resistance level at 1.511 almost coincides with the 23.6% Fibonacci retracement level at 1.5188. The next monthly support is at 1.4230.
GBPUSD, 240
The pair rallied some 200 pips yesterday and created a daily bullish pin bar candle in the process. This supports the view that GBPUSD is trading near a major support level. The rally was stopped at an intraday resistance area between 1.4636 and 1.4661. These levels coincided with the down sloping regression line. Stochastics (7) is getting overbought and market has reacted lower forming a bearish pin bar in the four hour chart. The 30 period simple moving average is not far from the 1.4661 resistance while the upper Bollinger Bands are currently near 1.47 together with the 50 period moving average.
GBPUSD, 60
The hourly chart reveals how GBPUSD has rallied above the bearish trendline that this week limited its rallies until yesterday’s rally penetrated it. Price is now trading above the 30 period SMA but is still below the resistance area at 1.4636-1.4661. The nearest important short term support area is at 1.4532-1.4574 which coincides with the down sloping trendline in the 60 min chart and the lower Bollinger Bands in the 4h chart. The next significant resistance is at 1.4807.
Conclusion
Market is trading at major support area and is therefore likely to be near to a stage when it starts consolidating before turning higher again. From a short term trader’s point of view such price action can provide opportunities in both directions. Critical levels in short term are 1.4530-1.4566 support and 1.4636-1.4661 resistance. If the pair can create a higher low at support and then push through the resistance there is room to move to 1.4807 while the next support below 1.4530 is at 1.44. Support area visible in 60 min chart (1.4532-1.4574) is now interesting after yesterday’s rally from the monthly support. Short trades make sense (if sell signals appear) at above mentioned resistance area with the Target 1 at the supporting price bracket and Target 2 at 1.4467 while risk on the long side can be justified should price action provide us with relevant signals inside the same support area. This would negate the need for Target 2 in the short side. In case a long trade gets triggered Target 1 is at 1.4636 and Target 2 at 1.4695. US Non-Farm Payrolls report is out in a couple of hours and should the actual number deviate strongly from the expectations markets could move beyond the nearest technical levels. We wait for the employment numbers and market reaction to them before considering opening new positions.
Janne Muta
Chief Market Analyst
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About Janne Muta, HotForex’s Chief Market Analyst
Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.
Traders and fund managers from around the world have benefited greatly from Janne’s technical analysis methods. The indicators and price action based trading models he has developed, have, after rigorous testing, proven to be invaluable in identifying high probability trades.
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