GBP/USD Technical Analysis: Eerily Calm

GBP/USD Technical Analysis: Eerily Calm


GBPUSD Talking Points:

– Cable (GBPUSD) has quieted down this week as a short-term range formation has built on the chart. That can be a dangerous formation to plot for continuation given the frenetic price action that was on display in the pair leading-in to the range.

GBPUSD had a wild month of March leading into this week, with multiple twists and turns, often driven by continued developments in the Brexit saga. But – with a no-deal Brexit not looking so likely, and with a dovish twist at the Fed around last week’s rate decision – might there be a bullish backdrop for the Pound on a longer-term basis?

– DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading GBPUSD? Check out our IG Client Sentiment Indicator.

GBPUSD Builds into a Range: Be Careful

After what can best be described as a frenetic month of price action that’s shown through March trade, GBPUSD has exhibited a bit of stability as prices have built within a range over the past week. Resistance has held around the zone previously identified that runs from 1.3231-1.3250; while support has remained in-place above the 1.3150 area with considerable focus around the 1.3087-1.3117 zone. And if this were any other market, the prospect of working with such a range might remain very attractive given its consistency: But around the British Pound at the moment, consistency is one of the last things traders would want to expect to continue.

GBPUSD Price Chart

gbpusd gbp/usd hourly price chart

Chart prepared by James Stanley

GBPUSD: Near-Term

This calm is unlikely to last and with the Brexit saga continuing to thicken, another swell of volatility may soon be around-the-corner. As discussed in these pieces over the past month-and-change, that presents a rather troubling backdrop for traders looking to work with near-term trends given the sharp and erratic moves that price action has been exhibiting in either direction.

For those that do want to take on risk in order to integrate GBP volatility into the portfolio, the most likely attractive option would be to look for swing trades off of key support or resistance levels coupled with relatively tight stops. That way, if the move doesn’t work out or if another headline hits that evokes a reversal, the damage can be mitigated by the tighter stop and lessened risk outlay.

Last week saw a quick test down towards the 1.3000 level with buyers stepping in a few pips ahead of that price; and that came after the prior week saw a failed breakout at the 1.3350 level that had previously helped to set the February swing-high. Inside of that, potential resistance exists at the 1.3289-1.3300 area on the chart, which has already seen two different resistance tests in the second-half of March.

GBPUSD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

GBPUSD Longer-Term

Given that there’s been a recent development of hope on the Brexit front, in which a ‘no deal Brexit’ may be avoided, there may be bullish longer-term leanings in the pair; particularly when taken around the backdrop of the US Dollar and a Federal Reserve that’s been getting more dovish of recent.

From the Daily chart, traders can see where GBPUSD has been putting in the semblances of an ascending triangle, with that 1.3350-1.3360 resistance area holding the highs to go along with a bullish trend-line. That bullish trend-line was tested during last week’s spill but, to date, the Daily chart hasn’t yet presented a closed bar through the line to negate its potential value.

This can keep longer-term traders looking towards bullish setups, with breakout potential should prices rally to fresh highs. There is a potential complication, however, as the 1.3500 level may bring an even harder force of resistance, as there are numerous Fibonacci levels around the psychological price. For those looking to treat the matter a bit more conservatively, that zone of resistance can be followed for breakout continuation in order to move back into a bullish bias.

GBPUSD Daily Price Chart

gbpusd gbp/usd daily price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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