GBPUSD corrected backwards and below its shorter-term simple moving averages (SMAs) and the Ichimoku cloud, but the strong ascending trendline from May’s low of 1.2074 was there once again to support the market.

The price printed a bullish hammer candlestick at that point on Monday, and it remains to be seen if it can stage an upside reversal in the coming sessions as the momentum indicators are somewhat conflicting at the moment. The RSI is beneath its 50 neutral mark, though marginally, the MACD is weakening below its red signal line, but is still attached to zero, while the red Tenkan sen line is set for a bearish cross with the blue Kijun-sen.

In the event the bulls take control, immediate resistance may occur within the key 1.2992-1.3080 zone, which includes the 23.6% Fibonacci of the 1.1409-1.3481 upleg, the 20- and 50-day SMAs, and a long-term descending trendline from 2015. A close above this region could send the pair straight up to the 1.3200 hurdle, hinting that the improvement from September’s lows is more than a simple upside correction. Next, the pair may retest the restrictive upward-sloping line from April – probably somewhere near the 1.3330 barrier.

Alternatively, a move to the downside should pierce the supportive trendline around 1.2870 to accelerate towards the 200-day SMA and the 38.2% Fibonacci of 1.2700. A significant break lower would re-activate the downfall from the 1.3481 peak, turning the outlook more bearish. If that is the case, the pair may next target the 50% Fibonacci of 1.2445; however some consolidation around the 1.2580 former resistance zone cannot be ruled out.

In brief, the recent sell-off in GBPUSD seems to have found a bottom, though the short-term bias remains skewed to the downside, making another downside extension possible. A step below the ascending trendline could confirm additional losses, while a rise above 1.3080 could bring more gains.