The $1.32 Resistance Rejects Sterling’s Uptrend Throughout the WeekThe British Pound has been able to recover quite nicely against the U.S. dollar. After the massive nosedive it took in early March amid fears over COVID-19, Sterling began trending up.
Prices rose to a high of $1.317 on Friday, July 31st, only a few cents below where GBP was trading before the global financial turmoil began.
As a new week was about to start, investors seem to have taken profits over the weekend. The increase in supply pushed the GBP/USD trading pair down by 0.73%.
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Thus, the Pound kicked off the week of August 3rd at $1.309 while sell orders continued to pile up. The selling pressure was significant enough to send it further down by 0.53%. By 13:00 UTC, Sterling had reached an intraday low of $1.301. Nevertheless, this support level served as stiff resistance allowing it to rebound 0.80% to hit a high of $1.311 the following day.
Even though it seemed like the GBP/USD trading pair was bound for further gains, a sell-off took place on August 4th. Between 7:00 UTC and 12:00 UTC, the Pound plunged 0.97% to a weekly low of $1.298. This support level was met with a significant number of buy orders, which allowed it to enter a new uptrend.
Sterling went through a bull rally the next two days that saw it rise 1.57%. As prices took another aim at early March’s high of $1.320, this resistance zone was able to hold steady once again. The rejection resulted in a 1.34% nosedive, and the Pound hit a low of $1.301 a few hours before the weekly close.
Like it happened on Monday, August 3rd, this support level prevented GBP from a steeper decline. The rebound enabled prices to recover by 0.30%, and Sterling closed the week at $1.305. Despite the high levels of volatility seen throughout the week, the Pound only provided investors a weekly return of 0.20%.
More Losses to Come?
Even though the Pound did everything to reach a new 5-months high, the overhead resistance was able to hold steady. The way Sterling was rejected by the $1.32 barrier must be concerning for those betting to the upside. With multiple technical indexes estimating that the GBP/USD trading pair is poised to retrace, the chances for a downturn are currently high.
In the event of a downswing, investors must pay close attention to the $1.301 support level. This price hurdle poses a lot of significance to the Pound’s uptrend. Staying above it increases the odds for another upswing towards the $1.32 resistance.
However, moving past it may trigger panic among investors. An increase in the selling pressure behind Sterling could see it drop towards $1.281 or even $1.272.
Given the ambiguity the Pound presents, traders must pay close attention to the $1.301 support level. The strength of this supply barrier will determine where GBP is headed next.
Konstantin Anissimov, Executive Director at CEX.IO