GBP/USD – Correction over?

Key levels lie below

The pound has been recovering against the dollar this month after breaking key support towards the end of September, but it may be running into trouble.

The pair has run into some resistance around an area that has been a major support zone for much of the year so far. What’s more, it falls around the 50% retracement level which would be a typical rotation level during a correction.

This level has been strongly rejected on a few occasions now, the strongest of which coming today, with price now testing recent lows after pulling significantly back.

The recent rally had already been running on low momentum and further resistance lay a little above around the 61.8% retracement level, which coincided with the 200/233-day SMA band on the 4-hour chart.

A move below 1.3580 may suggest the correction is over, with a break of 1.3544 arguably confirming that. This would trigger the break of the neckline of a double top and may suggest the pair is eyeing the levels seen earlier this month.

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Craig Erlam

Craig Erlam

Former 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.