GBP/USD failed to breach a notable horizontal level twice last week and could be vulnerable to a pullback.
The dollar is under slight pressure to start the new week after attempting to recover last week. GBP/USD has gained about a quarter percent shortly after the European open after posting a daily loss of about 1% on Friday.
While the pair displayed somewhat volatile swings last week, it’s important to note that a range has been playing out for most of the month. This range type of trading could continue in the week ahead as there isn’t any economic data scheduled for release that stands to have a market impact.
Considering that there is an important technical resistance area in play for GBP/USD, the pair might be at risk of a pullback at this stage. This will largely depend on the dollar as it has been dominating fluctuations in all of the major currency pairs since around mid-March.
GBP/USD posted a very strong gain in July but is set to close August out mostly unchanged.
It’s not unusual to see a range develop after a strong move higher, but it’s also not unusual to see a range prior to a reversal.
With several of the major currency pairs testing important technical areas in a correlated effort, a reversal is certainly a possibility for GBP/USD.
The major hurdle for the exchange rate falls at 1.3260, which blocked rally attempts twice last week. Both attempts at the level accompanied a sharp fall.
The importance of the 1.3260 level is best seen on a monthly chart. It blocked rallies in both February and December last year, and the pair has not closed above it, on a monthly basis, in over two years.
For the session ahead, resistance for the pair is seen at 1.3163 as the price point capped gains back in late July and earlier this month.
To the downside, the first level of support comes from a rising trend channel that has encompassed price action throughout August. Slightly below it, further support is seen from a horizontal level at 1.3015.
For a look at all of today’s economic events, check out our economic calendar.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.