Technical Analysis – GBPUSD waits for a channel breakout

GBPUSD extended its recovery from a 5 ½-month low of 1.3570 marginally above the 1.3800 level and the 20-day simple moving average (SMA) on Monday but another obstacle has emerged.

The price is currently battling the surface of a descending channel and the 38.2% Fibonacci retracement of the latest downfall at 1.3829. Should efforts prove fruitful, the door would open for the 50% Fibonacci of 1.3900, while within breathing distance, the 50-day SMA at 1.3952 may cancel any corrections towards the 61.8% Fibonacci of 1.4032.

The upside reversal in the momentum indicators is endorsing the above bullish scenario, though downside corrections cannot be excluded as long as the RSI keeps hovering below its 50 neutral level and the Stochastics flirt with overbought levels.

Failure to bounce above the trendline and the 1.3829 barrier could see another test near the 23.6% Fibonacci of 1.3730 and the 200-day SMA. Breaching this floor, the bears could take a rest near the 1.3668 support region before gearing down to meet the 1.3570 low. Beneath the latter, the channel’s bottom line could be the next pivot point around 1.3500.

Summarizing, despite its latest rebound, GBPUSD has yet to confirm a bullish bias, with traders waiting for a close above the descending channel to increase exposure in the market.

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