Forex Technical Update
The daily GBP/USD chart shows a market that has been in a bull swing that broke above a declining trendline. It is now stalling as it tests a resistance cluster. There is a pivot around 1.59, a 200-day simple moving average, and the 50% retracement o(f 1.6616 to 1.5232) at 1.5924. The RSI is also tagging 70, which shows some bullish momentum, but in the short-term signals overbought conditions. This calls for a correction, but if the trend persists afterwards, the upside is to the next resistance cluster in the 1.6080-1.61 area.
The 4H chart shows a bearish divergence with the RSI. The fact the RSI failed to tag 70 after bouncing off 40 shows a bit of slow-down in momentum. A correction that breaks below the rising trendline shown in the 4H chart opens up 1.5580 (50% retreacemnt of 1.5232 to 1.5927) and 4H 200-SMA. 1.5662 (38.2% retracement) is also a support factor to monitor for the bearish correction scenario. However, failure to break below 1.5850 and a new high above 1.5927 suggests at least a touch of 1.5950 before the consideration of correction.
Risk-Event Correction? The Bank of England meets Thursday 2/9 at 7:00AM EST (12:00GMT). The market may want to flatten out or correct itself in anticipation of this risk event, giving the short-term bearish outlook more reason.
Make sure to join Nick and I at the IBTrade live market intelligence briefing at 8:00AM EST (13:00GMT) where we will cover the BoE decision as well as the ECB decision and press conference. To gain free access to live events register here at IBTrade.
Fan Yang CMT is the Chief Technical Strategist for IBTRADE, trader, educator, and a main contributor for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.