Technical Analysis – GBPUSD’s positive signals remain intact despite consolidating

Anthony Charalambous, XM Investment Research Desk

GBPUSD looks to have lost some steam transitioning into a sideways move, with the short-term oscillators reflecting a stall in momentum. The pair may be in the process of forming a pennant – valid on a break of the upper or lower lines – after the rally from October 8, which pushed the price aggressively above all the simple moving averages (SMAs).

The MACD, deep in the positive region, has moved slightly below its red trigger line, while the stochastics %K has crossed below its %D line, also reflecting some easing in the positive momentum. The RSI remains in bullish territory, hovering underneath the 70-level, improving only barely. Moreover, the bullish view from the upward sloping SMAs is intact, with the 50-day SMA headed towards the 200-day SMA.

Steering lower, initial support could come from 1.2835, which is the 61.8% Fibonacci retracement of the down leg from 1.3381 to 1.1957, and where the 20-day SMA and lower line of the pennant lie. Lower, the 1.2783 support could hinder the drop to the 200-day SMA presently at 1.2705. Surpassing this, the price could rest at the inside swing of 1.2581, before testing the 50-day SMA and 38.2% Fibo at 1.2525 and 1.2500 respectively.

To the upside, if the buyers push above the upper line of the pennant, the 1.3011 five-month high could apply some pressure before the neighboring 76.4% Fibo of 1.3045. Climbing higher, the swing peak of 1.3176 from May 3 comes next with the highs from March at 1.3268 and 1.3310 following.

In brief, the pair’s neutral-to-positive bias in the short-term may endure slightly longer. However, a break above 1.3011 or below 1.2783 would expose the broader direction.