Failure to Clear Cluster Resistance Can Steer Cable Lower

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GBP / USD WEEKLY SUPPLY: LOWER

  • GBP / USD has been suspended at resistance several times in recent days
  • Fading bullish momentum points to near-term weakness in Pound Sterling
  • Volatility is likely to increase in the coming week amid key monetary policy announcements

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From its annual lows near 1.3411 set at the end of September, GBP / USD rebounded significantly during this month, climbing more than 2% amid a strengthening bullish sentiment to the British currency in the context of a rate hike. Despite this large further move, buying momentum appears to be declining as reflected by recent price action.

The daily chart shows that GBP / USD has been trading mostly sideways since last week, after a failure several times to remove cluster resistance in the 1.3830 / 1.3855 region. This area has strong technical significance, as it is where the 200-day SMA converges with the upper limit of a medium-term downtrend channel and the 50% Fib rebate of the June / September correction.

With additional pressure clearly weakening in the middle of a solid ceiling in place, the imminent bias points to Pound Sterling weakness in the coming week, when volatility is likely to be higher than usual due to two major risk events: the Federal Reserve and Bank of England‘s announcement of monetary policy.

If the bass scenario plays after Friday’s decline, traders should watch closely whether GBP / USD holds below its 50-day moving average and the psychological mark of 1.3700, as continued movement below this area may be the harbinger of great sale, able to take a price to 1.3570, followed by 1.3410 in early November.

In case of an unexpected rebound, which at this point seems less likely, the first resistance to consider appears at 1.3830 / 1.3855. A decisive push over this barrier and channel break needed to rejuvenate the bullish momentum seen earlier this month and pave the way for buyers resume the September high near 1.3913.

GBP / USD TECHNICAL RAPER

GBP / USD Technical Forecast: Failure Classic Resistance Can Drive Cable Down

Source: TradingView

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— Written by Diego Colman, Contributor



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