GBPUSD was one of the best-performing currencies on Monday, which raced above the 1.4300 handle, extending a rally that has not created a retracement in the past seven trading days. The cable reached a fresh 22-month high of 1.4362 during today’s Asian session, signaling that the pair is ready for a bullish run and pointing to more strength in the market.
In the daily timeframe, prices rebounded off the mid-level of the Bollinger band (20-day SMA) and the 40-day simple moving average (SMA) and extended their rally, and based on the technical indicators, momentum is to too strong to provide a sustained move higher. The RSI indicator is approaching the overbought zone and is touching the 70 level, while the MACD oscillator is holding above its red-trigger line.
If price action remains above the 1.4345 immediate support, taken from the high on January 25, there is scope to test the 50.0% Fibonacci retracement level of 1.4575 of the significant downward movement on the weekly timeframe from 1.7180 to 1.1980. Clearing this key level would see additional gains towards 1.4770. This is considered to be a strong resistance area which has been tested a few times in the past.
If the price falls below the 1.4345 – 1.4245 support zone, then the focus would shift to the downside towards the 20- and 40-SMAs at 1.4136 and 1.4017 respectively. In case of a successful drop below these levels, it could open the door for the 1.3890 support followed by the 23.6% Fibonacci mark of 1.3815 of the upleg from 1.2100 to 1.4345 could act as critical support.
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