Bullish case:
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.
Bearish case:
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
