GBP/USD on the radar this week
|Sterling ended the week considerably lower against the US dollar, recording its largest one-week decline since July 2023 (-1.5%).
In light of the slew of UK economic data on the docket this week—wages, CPI inflation and retail sales—this will be a particularly key market to monitor.
Monthly resistance holding firm
Price action on the monthly chart continues to seek deeper waters south of resistance at $1.2715. While one may argue that this chart is now in the early stages of an uptrend, the high (arrow) at $1.3142, located near the next layer of resistance at $1.3111, would likely need to be breached before a long-term uptrend can be confirmed with any conviction. As things stand, the monthly support level at $1.2173 is viewed as the next logical longer-term downside target for GBP bears in the longer term.
Daily support calling for attention
Meanwhile, on the daily timeframe, Friday’s price movement absorbed bids at support from $1.2527 (now a potential resistance) and pencilled in a one-sided decline. This has left price action within shouting distance of an interesting area of support between $1.2331 and $1.2366, consisting of a handful of Fibonacci ratios, channel support (extended from the low of $1.2513) and ascending support (drawn from the low of $1.2037). What is also technically evident on the daily scale is the Relative Strength Index (RSI) fast-approaching oversold space—this could enter the noted area and perhaps draw up positive divergence at the point in which price action challenges the above-noted support area.
H1 chart: Sell rallies?
The resistance level from $1.2462 and the decision point area at $1.2498-$1.2489 jump out as reasonable zones of resistance to have on the watchlist this week.
The rationale is simple. Both monthly and daily charts exhibit scope to navigate lower levels; the daily chart shows support is not expected to enter the fray until $1.2331-$1.2366, which leaves H1 price action technically free to take aim at the $1.24 handle, at least. With that, short-term traders moderately sold into a pullback at $1.2462 on Friday, which may be enough to trigger further underperformance this week towards $1.24. Though should a pop higher unfold, eyes will be on $1.2498-$1.2489 as a potential area of resistance.
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