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GBP/USD – A strong barrier of resistance

Can it break back into bullish territory?

The dollar has come under pressure over the last couple of weeks as the economic data has necessitated a more dovish line from the Federal Reserve .

The result is that, despite breaking below the 200/233-day SMA and into bearish territory, the pair has failed to gain much traction to the downside.

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We’ll soon see whether that failure is temporary or more prolonged, with the pair now testing the upper end of that band from below. This also coincides with the 55-day SMA and the 38.2% retracement level of the June highs to July lows.

On the 4-hour chart, this also coincides with the 200/233-period SMA band, so it’s no surprise the pair is seeing so much resistance around this area.

The rally over the last couple of weeks is seeing momentum slow, as evidenced by the rising wedge – a bearish pattern , and the stochastic and MACD on the 4-hour chart, where divergences are clear.

That would suggest a continuation of the move lower is more likely but also that a break above 1.38 could trigger quite a sharp and bullish move higher, with stops above here potentially exacerbating any move.

With Fed speakers and US data today and the US jobs report tomorrow, we may not have to wait long to see which it will be.

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 [5]

Senior Market Analyst, UK & EMEA at OANDA [6]
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

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