The GBP/USD cross picked up steam for the second time in a row on Tuesday, climbing to the 1.3800 area in the opening European session, but failed to sustain the gains. The rise might be attributable purely to cross-driven momentum resulting from a new leg below in the EUR/GBP pair. Nonetheless, a small Dollar increase kept any further advances for the majors at bay amid renewed Brexit worries.
Technically, the GBP/USD duo has been exhibiting some durability at the 200-hour SMA. This is swiftly followed by the lower limit of a rising band stretching from the 1.3400 level, or September pendulum low points. The latter, which is currently trading in the mid-1.3700s, also should serve as a critical turning point for brief traders. A solid break under will pave the way for a continuation of the recent decline from the crucial 200-day SMA.
The GBP/USD cross might potentially extend its corrective slide to the 1.3700 round-figure level. The next key support is located in the 1.3675-70 horizontal area, which if firmly breached will expose the pair. However, chart patterns on the daily chart, despite losing positive momentum, are still securely in the bullish zone. As a result, caution should be exercised before initiating aggressive negative bets on the GBP/USD pair.
On the other hand, any major upward movement beyond the 1.3800 level may face tough opposition in the 1.3830-35 confluence zones. This consists of the 200-day SMA and a negatively sloped trend-line that dates back to late July. Some follow-through purchasing might push the GBP/USD pair closer to the trend-channel resistance level, which is now around 1.3885. A prolonged rise over this level will be viewed as a new trigger for optimistic traders.
Overview Of The Technical Aspects
GBP/USD CHART Source: Tradingview.com
GBP/USD is struggling to re-enter the upward regression range established in late September. On a modestly optimistic note, the four-hour chart’s Relative Strength Index (RSI) signal is hovering near 50, indicating that sellers have yet to control the pair’s movement.
On the negative, the initial technical support is at 1.3740 (Fibonacci 23.6 percent retracement of the most recent rally), followed by 1.3700 (psychological mark, 200-period SMA, 100-period SMA) as well as 1.3680 (psychological tier, 200-period SMA, 100-period SMA) (Fibonacci 38.2 percent retracement).
A daily finish of over 1.3800 (psychological barrier, rising channel opposition) could be interpreted as a bullish sign. The next impedances could be identified at 1.3830/40 (October 20 peak, October 21 peak, channel midline) and 1.3880. (stagnant level).
Overview Of The Basics
Since the start of the week, GBP/USD has been trading in a narrow range below 1.3800, as traders wait for further Brexit news. According to recent reports, the UK is unhappy with the EU’s Northern Ireland agreement plans. The UK’s Brexit Director, David Frost, stated on Monday that the EU’s amendments do not “open up” commerce in Northern Ireland. “The EU ideas on Northern Ireland are not adequate,” Frost continued. Frost also dismissed the concept of the UK conceding on the role of the European Court of Justice in the Brexit arrangement.
Therefore, market players are unlikely to take the BoE’s hawkish monetary outlook into account. Meanwhile, Greenback’s strength against its key rivals prevents a recovery in GBP/USD. The US Dollar Index, which gauges the greenback’s strength against a group of six major currencies, is maintaining Monday’s advances under 94.00.
If the index rises over that mark, the currency’s purchasing pressure could increase, weighing on GBP/USD. Even though the USD loses ground, the pair’s near-term upward potential is limited until good Brexit headlines propel it.