GBP/USD Price Analysis: Cable has pushed aggressively higher but is very close to an important resistance zone

GBP/USD 4-hour chart

GBP/USD has been one of the outperformers on Thursday and rocketed higher against the greenback throughout the session. As the risk sentiment improves so does the pound, as it cements itself as one of the key risk linked FX majors. 

Looking at the 4-hour chart, the price is heading toward the 1.25 resistance level. At this figure, there is a confluence of factors which could mean it is an important resistance zone. If you are a fan of Elliott Waves then you may have noticed the level highlighted in blue is the wave 1-2 low. One of the guidelines for the Elliott Wave Theory is that the 1-2 connecting point must not be breached by any of the wave retracements If this current move lower is to be the "traditionally" longest wave 3 then it should not be broken to the upside. If the level is broken then this could be an ABC pattern before the underlying move continues but we must wait for confirmation. If this is to be a wave 3 then a rejection could be a confirmation followed by a break of the wave low of 1.2251.

The blue resistance line is also a psychological level as it is a round number. Often some of the best support and resistance zones reside at round numbers. Looking at the Relative Strength Index Indicator, there is a red line connecting the peaks. This is called a bearish failure swing and is when the price makes a lower high wave but the indicator makes a higher high wave. It could be a signal that the retracement higher has reached a peak and hit the overbought zone. 

The MACD histogram is in the green but the signal lines are still under the zero mid-point. This is a bearish sign and if the tide does turn to the upside watch out for a lagging move from the signal lines. 

Additional levels