GBP/USD Daily Forecast – Cable Falls Into a RangeGBP/USD started the week off under a bit of pressure but much of that has subsided at this point. The pair ranged in North American trading on Tuesday and a range break in the session ahead should clarify the near-term trend.
The Near-Term Downtrend has Lost Some Momentum
The price action in GBP/USD in the week thus far has been somewhat peculiar. The pair fell under pressure on Monday, but since then, a range has formed.
What makes this interesting is that Monday was a bank holiday, and as such, volatility often slows. This was not the case for GBP/USD as it was under steady pressure in early day trading.
Tuesday price action stood out even more. Mostly because the dollar caught a strong bid in the North American session. It led to a rally in USD/CHF that was a few pips shy of a weekly high. Meanwhile, EUR/USD dropped below a confluence of support below 1.1170.
So I found it surprising that GBP/USD held within a range despite the dollar strength. Perhaps it shows some underlying Sterling strength. But GBP/USD has not given a technical signal that it will reverse from the downtrend that started on Monday.
In the hourly chart above, it can be seen that most of this week’s downside pressure occurred on Monday after it hit a high near 1.2750.
The pair then consolidated near support at 1.2677 for quite some time prior to finally breaking down in early European trading on Tuesday. However, after the initial push down a range formed.
Indeed, there is some selling pressure in early trading today and an attempt to break below 1.2654.
Upside resistance at 1.2677 is now reinforced by the hourly 100 moving average.
The above 4-hour chart shows the loss of momentum a bit clearer than the hourly chart. Note the small size of the candles that followed the initial two candlestick push lower.
This chart also shows the relevance of the horizontal level at 1.2654 that offered support throughout the day yesterday.
Lastly, the daily chart further emphasizes support at 1.2654. There has not been a daily close below it this month.
- A clear break of 1.2654 can offer a short opportunity to support at 1.2624, although I consider this to be an aggressive trade.
- What the dollar does next will be important. I have some reservations that it will move much higher without a catalyst, and this week, the economic calendar is light. Also, EUR/USD is near an important support level that I outlined in my earlier weekly forecast.
- I would need to see a push above yesterday’s spike high of 1.2701 to consider a bullish scenario at this stage.