On Tuesday, the opinion that “there is still time for the pound to retest the level of 1.3640 before the risk of a drawdown increased,” following that, the pound surged to 1.3648 before coming off slightly. With the rise to 1.3648 lacking impetus, the market is more likely to move lower today. Having stated that, any weakening will most likely be restricted to 1.3580. (Little strength is at 1.3600). Resistance is located at 1.3650, with the substantial scale at 1.3680 as the second level of support.
In the next 1-3 weeks, there is no expected change in general from Monday’s position (04 Oct, stance at 1.3570). As previously said, the present movement in the pound is considered to be part of a process of consolidation, and the pound is expected to trade within a range of 1.3460/1.3680 for the time being. Thinking forwards, a breach above 1.3680 could spark a rally in the pound, but any increase is unlikely to push the currency over 1.3750 levels.
Overview of the Technical Details
GBP/USD CHART. Source: Tradingview.com
From a technical standpoint, the duo’s upward movement this week has put it back just above the 200-hour simple moving average. Perhaps the subsequent strength and adoption above the 38.2 percent Fibonacci level of the 1.3913-1.3412 decline have already paved the way for further gains shortly. The setup is favorable for bullish traders, and it promotes the possibility of certain dip-buying at the 1.3585-80 range (200-hour SMA).
However, a solid break below the 1.3530 level could result in significant analytical dumping, pushing the decline even further below the 23.6 percent Fibo. level, which is located near this area. Next comes the psychological resistance level of 1.3500, which if breached strongly will alter the market’s bias back in favor of bearish investors.
On the other hand, the overnight swing peaks, which are currently located around the 1.3645-50 range, appear to be acting as instant opposition. If there is some follow-through purchasing beyond the 1.3665 area, which corresponds to the 50 percent Fibo. level, the pairing will reinforce its bullish perspective and go back towards the 1.3700 level, on its way to the 61.8 percent Fibo. level, which is located near the 1.3720-25 region. The bullish trend might be extended even further towards the next significant barrier, which is expected to be around the mid-1.3700s.
Outline of the Basics
On Tuesday, the GBP/USD pair rose to one-week highs but failed to sustain the gains. The pound gained some strength after the government declared that the military services would begin providing gasoline across the nation. Also, UK Prime Minister Boris Johnson stated that Christmas supply routes are reliable.
The UK Services PMI for last month was revised up from 54.6 to 55.4, strengthening the pound. However, the wide-ranging US dollar surge capped any additional advances for the majors for now. Speculation that the Fed may begin cutting its asset purchases as early as November boosted the USD’s appeal after a recent retreat from one-year highs. This, together with a steep jump in US Treasury yields, kept the dollar strong. This could lead to some interesting trade opportunities ahead of Friday’s much-anticipated US monthly jobs data (NFP).