GBPUSD Bulls Standing on the Precipice

It’s been an excruciating slow start to the trading week with an absolutely barren economic calendar in both Asia and Europe today. Over the weekend, news hit the wires that the US and Europe are preparing another round of economic sanctions against Russia for their involvement in the ongoing clash in Ukraine, and this is keeping risk appetite relatively subdued ahead of today’s US session. With minimal new price action today, it’s worthwhile to take a step back and look at the bigger picture for pairs like GBPUSD.

In case you’ve been trapped on a deserted island with no internet access for the past year, a brief look at the chart would tell you that GBPUSD has been rising consistently within a sustained uptrend since last July. While short-term bulls are no doubt concerned with the now eight consecutive bearish closes on the daily chart, the longer-term rising channel remains intact with critical support at 1.6925. As long as the pair keeps putting in higher highs and higher lows on the daily chart, the medium-term bias remains to the topside.

Beyond looking at price alone, another effective technical tool is to analyze the “character” of the secondary indicators, which in this case supports the generally bullish, but fragile, view. For one, the RSI is ticking up off strong previous support at 40, an area that typically provides a floor within an uptrend. Meanwhile, the MACD is descending rapidly, but still has time to find support just below the “0” level, where it has consistently found a floor over the first seven months of the year. While these two indicators remain within their recent ranges, traders will give the established uptrend the benefit of the doubt.

From here, a bounce off support at the 50-day MA (1.6970) or the bottom of the bullish channel (1.6925) appears likely. If and when that rally emerges, the key factor will be whether it goes on to set a new high above 1.7190: a new high would reconfirm the uptrend and open the door for a run toward 1.7300 or higher, whereas a failure to set a new high would raise the risks that the longer-term uptrend may finally be reaching its end.