GBPUSD – Possible Morning Star on Key Support

Cable is potentially looking quite bullish again after consolidating over the last week. The pair found support around 1.5530 from the 55 and 233-day simple moving averages and the 38.2 fib level – 8 July lows to 15 July highs – and now appears to be pushing on again.

gbpusd daily

If today’s candle closes above 1.5589, or around this level, it would create a morning star formation – very bullish setup – on a key support level. Of course, it should be noted that these formations are always stronger when the first and last candles are larger.

While the moving averages haven’t been great levels of support and resistance recently, they generally tend to be less effective during periods of consolidation, which we have seen as of late.

That said, the 55-day SMA has now crossed above the 233-day SMA which is a bullish signal and could trigger the next leg higher. Also, in recent sessions the two have offered strong support for the pair.

If the pair fails to hold above this support, further support could be found below around 1.55 – the 50% retracement of the above move.

gbpusd 4hr

A signal that this support may give way could come from the failure and the morning star to form on the daily while an evening star forms on the 4-hour. And a more convincing one at that with the first and last candles being larger.

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.