GBPUSD – Further Divergence as Pair Nears Support


gbpusd 4hr

On this occasion, the 233-period simple moving average also weighed in to offer additional support around the 1.5230 level. The pair is now very close to the area that I highlighted previously (GBPUSD – Divergence Seen at Key Support) is looking like a key support region.

While I remain bearish in the long run, I think we could see some short term upside in the pair very soon. Given the descending channel that the pair now finds itself in, 1.5525 strikes me as a logical barrier to the upside, especially as it coincides with the 50 fib level – 14 May highs to today’s lows.

The pair may face initial resistance though around 1.5450 which has offered both support and resistance recently. This is also roughly the 38.2% retracement of the above move.

If we continue to grind to the downside then 1.5170-1.52 should offer further support as this is a prior support and resistance area and the 89-day SMA will also make it difficult. A change in momentum – and breaking of the divergence – may suggest a change has occurred at which point this level would not be as strong in my view.

gbpusd daily

As with all of these support levels, I would like to see a reversal setup on the daily chart to support the divergence, be that a hammer candle or something more convincing like a bullish engulfing pattern.

It should be noted that OANDA traders are becoming less bearish on this pair as momentum has been lost.

Open Position Ratios

While historically the net position has been on the wrong side of the trade, which may support the bearish view, the net position has been on the right side of the trade over the last couple of weeks.

Historical Position RationsFor access to OANDA position ratios, historical position rations and other trading tools, visit FX Labs.


Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.