GBP/USD Tumbles below the Psychological Zone of 1.4000

GBP/USD tumbled on Monday, falling below the psychological barrier of 1.4000. Nevertheless, during the Asian morning Tuesday, the pair hit support fractionally above the 1.3915 line and then, it rebounded somewhat. The rate is printing lower peaks and lower troughs below the prior medium-term upside support line drawn from the low of the 13^th of November, and also below a new short-term downtrend line taken from the peak of the 17^th of April. What’s more, all our three moving averages have turned down, with the 50-EMA crossing below the 100-EMA. Therefore, having all these in mind, we believe that the short-term outlook is negative for now.

Currently, the rate is trading near the 1.3965 resistance, marked by the inside swing low of the 5^th of April. If the bears manage to jump in near that level, we would expect them to aim for another test near the 1.3915 zone. A dip below that level could initially aim for the 1.3890 line, the break of which could carry more downside extensions, perhaps towards our next support of 1.3840.

Taking a look at our short-term oscillators, we see that the RSI has bottomed within its below-30 territory and just poked its nose above 30, while the MACD, although negative, has bottomed as well, and crossed above its trigger line. These indicators suggest that further rebound may be in the works for now before, and if, sellers decide to take charge again.

A break above 1.3965 could confirm the notion and may open the way for the crossroads of the 1.4000 zone and the short-term downtrend line. That said, even if this is the case, given that the rate would still be trading below the trend line, we would still see a negative near-term picture. Sellers may take advantage of the rate’s proximity near the 1.4000 zone and perhaps shoot again. We would like to see a clear move above the trend line and the 1.4000 zone before we abandon the bearish case and turn neutral. Such a move could initially aim for the 1.4030 level. Another break above that hurdle could set the stage for the 1.4080 zone, slightly below the prior medium-term upside support line drawn from the low of the 13^th of November.

Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers

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