GBP/USD: Short term bullish

GBP/USD after reaching a 2020 low is set, in our opinion, to short-term recovery.

From the graph is visible how cable has entered on a 6 months bearish channel since the beginning of June. We believe that the cable rate might be soon for recovery: our conviction is based on technical analysis and positive divergence between indicators and price action.

if we compare the low of 29 September to the recent lows of 12 November we notice a positive divergence between RSI and Price: lower low on the price and higher low on the RSI. On the last descending move, from 1.3820 to 1.3370, the price did not actually respect the bearish channel. In fact, following the pattern we would have expected a fall till 1.3250 to say the list: we see this early inversion as possible upside potential. MACD reached a strong support level that has seen in the past reversal move to the upside and a gain of momentum RSI reached almost oversold territory and is soon to break a descending trendline formed since the high of 19 October.

To conclude, we believe the bearish trend of GBP/USD might be soon for a pause where we see bullish short-term targets. A break of the channel at 1.3580, might see a further push at the resistance area of 1.3800. A possible area of consolidation might also be the 1.3700 level A rise of the GBP/USD might also bring the FTSE100 to retrace slightly from the current overbought levels.

Entry range: 1.3360 - 1.3420.

Target 1: 1.3580.

Target 2: 1.3800.

Stop loss: 1.3200.