GBP/USD finds support around 40-day SMA after bearish rally

Melina Deltas, CFTe XM

GBPUSD is currently challenging the 40-simple moving average (SMA) in the daily timeframe after the aggressive selling interest from the three-and-a-half month high of 1.3217 on January 25. The price is also hovering around the 23.6% Fibonacci retracement level of the downward movement from 1.4375 to the 21-month low of 1.2390.

The short-term bias remains neutral to bearish, as confirmed by the technical indicators. The RSI indicator is flattening around the 50 level, while the MACD oscillator is slipping in the positive zone below the red trigger line. Furthermore, the %K line of the stochastic oscillator recorded a bearish crossover again in the oversold zone, suggesting negative movement in the near term.

In the wake of more downward pressures, the market could meet immediate support at the 1.2815 level, taken from the inside swing high on December 31. A successful close below this level could see a retest of the previous bottom of 1.2660, while in case of steeper declines, cable could breach this trough, diving to 1.2475.

On the flipside, a move to the upside above the 23.6% Fibonacci of 1.2855 could find resistance near the 20-SMA currently near the 1.3000 strong psychological level. If the price increases positive momentum above this area, the 38.2% Fibonacci of 1.3145 could be the next level in focus.

Summarizing, in the medium-term, GBPUSD seems to be neutral over the last six months as it failed to post a sharp upward movement above the 61.8% Fibonacci.

Author

Melina Deltas, CFTe

Melina joined XM in December 2017 as an Investment Analyst in the Research department. She can clearly communicate market action, particularly technical and chart pattern setups.

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