GBPUSD – Reversal Setup Forming at Key Resistance

The rally in cable over the past couple of days has taken it back to the top of the descending channel, where it has run into resistance, experienced divergence and looks to be forming a reversal pattern.

gbpusd 4hr

Aside from the top of the channel, 1.5450 represents a prior level of support and resistance, while the 89-period simple moving average also combines here to create a strong barrier to the upside. It is also the 50% retracement of the move from 21 May highs to 1 June lows.

If this reversal pattern – an evening star formation – is completed today with the most recent candle closing more than half way into the last green candle, it would suggest the pair has once again turned bearish.

Initially, that would bring into play the two ascending trend lines around 1.5320 and 1.53. A break of these would in my view confirm the reversal of the trend to the downside. It would also mean the most recent low has been broken.

Beyond here, the next key level for me would be Monday’s lows of 1.5185. Not only is this the most recent major level of support, it’s also previously been a key level of support and resistance, and marks the 50% retracement of the move from 13 April lows to 14 May highs.

gbpusd daily

Moreover, a break of this level would mean a break of the 55 and 89-day SMAs, which would suggest sentiment has once again become very bearish in the longer term on this pair.

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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.