GBP/USD – Correction on the cards?

Or can it fall further?

The pound has been trending lower over the last month or so but the decline may finally be losing momentum.

It’s found some support around 1.32 but momentum has been slipping over the last week or two, creating divergences on both the daily and 4-hour chart, which may suggest a correction is coming.

If the pair has bottomed for now, how deep a correction can we expect? The first test is 1.3360-1.3375 where recent resistance combines with past support and the 55/89-period SMA band on the 4-hour chart.

Above here, 1.34 is interesting but 1.35-1.3520 is the next big test. Here, recent resistance combines with the 50 fib level and the 200/233-period SMA on the 4-hour chart.

Finally, 1.36 sees the 61.8 fib and the top of the 55/89-day SMA band. A move above here would suggest a much deeper correction is on the cards after six months of decline.

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

Senior Market Analyst, UK & EMEA at OANDA
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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