- GBP/USD cracking 1.2400 could trigger a bearish resumption, exposing 100 and 200-day EMAs at 1.2173.
- Buyers pushing GBP/USD above 1.2400 could spark upward momentum and test YTD high at 1.2546.
After a tranche of UK and US economic data, GBP/USD stays in sideways choppy trading, keeping the pair scrambling for direction following the last three days of uncertainty. From a technical perspective, three doji’s in a row suggests neither buyers’ nor sellers’ commitment to open fresh positions. Hence, GBP/USD is trading at 1.2439 after printing a low at 1.2367, below the 20-day Exponential Moving Average (EMA).
GBP/USD Price Action
Friday’s session was titled downwards, but since the early North American session, the GBP/USD aimed up, about to erase its earlier losses. Although the GBP/USD warrants further upside, price action in the last few days suggests buyers might be losing momentum. Indicators, like the Relative Strength Index (RSI), turned flat though tilted downwards, heading into neutral territory. At the same time, the Rate of Change (RoC) edged lower when compared to Thursday’s price action, suggesting that buying pressure is fading.
Therefore, the GBP/USD path of least resistance is downwards. The GBP/USD needs to crack the 1.2400 figure for a bearish resumption. Once cleared, the pair could dive towards the 20-day EMA at 1.2386, followed by the confluence of the April 3 low and the 50-day EMA at 1.2274/76. A breach of the latter and the GBP/USD could plunge toward the confluence of the 100 and 200-day Emas, around 1.2173.
On the flip side, if GBP/USD stays above 1.2400, it could test the April 19 cycle high at 1.2474. Buyers reclaiming the latter, upside risks will clear at 1.2500, followed by the YTD high at 1.2546.
GBP/USD Daily Chart
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The Sterling-Dollar (GBP/USD) exchange rate started the week quiet but bearish as it traded within a tight trading range between 1.2450-1.2430. Despite the markets largely ignoring last week’s good news from the UK, investors are still expecting the GBP to rally, despite the current range-bound situation.
In the 4-hour chart, the GBP/USD pair bounced off near a 50-period moving average near 1.2420, which is likely to be a crucial support if the price continues to move lower. However, 1.2428 is expected to be the lower level of support, if breached.
The pair has been gathering momentum since last week and the Doji candlestick pattern around the 1.2430 level suggests bulls and bears are indecisive with the volatility surrounding the pair.
If the British Pound breaches above 1.2450, then we can expect further upside, with a potential target near 1.2500. However, if the pair drops further, then the price may extend its losses and further move towards 1.2430.
It should be noted that despite the activity in GBP/USD, we could see a continuing range-bound situation in this currency pair and any breakouts may be short-lived.
Overall, we can conclude that the GBP/USD exchange rate is beginning a period of consolidation as the global economy begins to recovery. Therefore, traders should consider all the technical aspects before making any decisions.
