After testing briefly below the 200-day sma near 1.5845/50, GBPUSD has rebounded to break back above the noted 38.2% retracement as well as the daily 144 & 169 EMA’s. From an Elliot Wave perspective, the fact that the key 1.5765/85 level remains intact suggests this recent rally could be wave-5 up (blue), which could take Cable above 1.63 over the coming weeks. Additionally, with price above the 13-day sma (red), and this above the daily 144 & 169 EMA’s, it suggests a further recovery could be underway. Furthermore, daily RSI has broken above corresponding trendline resistance in advance to price.
Daily RSI broke below the key 40 level earlier in November, which implies general weakness in GBP/USD’s uptrend. Additionally, RSI still remains below the 60/65 level which often proves resistive in downtrends. From a strictly price perspective, Cable found stiff resistance into the 61.8% retracement near 1.6045 (using the November high & low) on Friday and this came just ahead of the 55-day sma around 1.6060. Slightly above there Sterling sees the top of the daily Ichimoku Cloud (1.6080) and then trendline resistance, drawn from the 9/21 high, around 1.6090/95.
That said, while price remains between 1.5850 and 1.6100, a good course of action may be to stay on the sidelines while the bulls & bears battle it out.
Keep an eye on key data announcements out of the U.K. as they could influence the path of GBP/USD over the next few days:
- 3Q Preliminary GDP – Consensus 1.0% (Tuesday)
- November Nationwide House Prices – Expected -1.0% YoY (Thursday)
- October Mortgage Approvals – Consensus 51.5k (Thursday)
- November GfK Consumer Confidence – Expected -30 (Thursday night)
Chart Source: Forex Charts by eSignal