GBPUSD – Potential Bearish Setup at Resistance

Cable made steady gains again on Monday on the back of stronger than expected UK manufacturing data earlier in the session before running into resistance around 1.55, as it did on numerous occasions in October.

GBPUSD Daily

The latest phase of the rally came at a time when the stochastic was making lower highs suggesting momentum in the latest rally is fading. This divergence at what has recently been a key resistance level is not in itself a bearish signal but it does make me less bullish in the short term.

With the pair trading at prior highs with divergence, the only thing that’s missing is a reversal setup which could be seen as confirmation that a consolidation, correction of reversal has occurred.

GBPUSD 4hr

We could be seeing that now on the 4-hour chart, with a possibly evening star formation appearing. If the current candle closes and confirms this, it would suggest further downside could follow.

Initial support came around 1.54, which held at the first time of asking. A break below here would support the view that further losses lie ahead. Below here, further support could be found around 1.5380 – prior support and resistance – and 1.5350.

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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.
Craig Erlam

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