GBP/USD has been going through a recent rough patch. A break under recent 1.3412 lows would mean a bearish triangle remains in play with better support coming in towards the 200-week moving average pegged at 1.3166, Benjamin Wong, Strategist at DBS Bank, reports.
Bears going through the gears
“On the daily Ichimoku charts, there are two points to observe. GBP’s post-BoE risk event’s decline stalled into the 1.3412 prior low. This can naturally conjure a simple double bottom setup and has seen downside momentum recede a tad on the DMI ADX readings. However, for GBP to regain composure, it must progress over the intermediate cloud resistance at 1.3698 (and the key moving average at 1.3835).”
“Brexit concerns return. There remains a threat that the UK’s Brexit negotiator David Frost may trigger Article 16 (of the Northern Ireland Protocol). This has naturally drawn fire from both the European Union (EU) and the Irish. A suspension of what was agreed prior infers a UK-EU trade war, and is GBP negative.”
“The retreat is guided by a bearish triangle breakout, with the possibility of GBP doing a 38.2% Fibonacci correction of 1.1412-1.4248 (Covid flash lows to late-May highs), which calibrates at 1.3158. A move here has to contend with 1.3201 as well, which is currently the weekly Ichimoku’s cloud support. Additionally, we remain biased to turn long around the 200-week moving average 1.3166.”
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