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GBPUSD – Further Divergence as Pair Nears Support


gbpusd 4hr [1]

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 [2]

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 [3]

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 Rations [4]For access to OANDA position ratios, historical position rations and other trading tools, visit FX Labs [5].


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

Craig Erlam [9]

Senior Market Analyst, UK & EMEA at OANDA [10]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

Latest posts by Craig Erlam (see all [9])