GBP/USD Price Analysis: Chaos emerges on inside candle formation

A formation of an inside candle pattern around the trendline has increased anxiety among investors.
The cable is oscillating between the 20-and 50-EMAs.
A range shift move by the RSI (14) indicates that the downside momentum has disappeared.

Sagar Dua FXStreet

The GBP/USD pair has witnessed fresh demand around 1.1310 in early Asia and is aiming to overstep the crucial resistance of 1.1340. The pound bulls are having an edge of the risk-appetite theme over the greenback bulls. Meanwhile, the US dollar index (DXY) is displaying a sluggish performance marginally below the 112.00 support, and may witness an increment in volatility.

On the daily scale, the cable has formed an Inside Candle pattern at the edge of the downward-sloping trendline placed from September 13 high at 1.1738. The above-mentioned candlestick pattern indicates a squeeze in volatility and a volatility contraction near the critical area indicates an explosion ahead. Also, it acts as an inventory adjustment formation, which is difficult to confine as accumulation or distribution until a decisive move.

The asset is restricted between the 20-and 50-period Exponential Moving Averages (EMAs) at 1.1245 and 1.1447 respectively.

A range shift in the Relative Strength Index (RSI) (14) into a 40.00-60.00 range from the bearish range of 20.00-40.00 indicates that the momentum is not bearish for now. Also, the oscillator has sensed support around 40.00, which signals that a bullish reversal is on cards.

Going forward, an upside break of Monday’s high at 1.1440 will drive the cable towards September 14 high at 1.1590, followed by September 13 high at 1.1738.

On the flip side, a drop below the round-level support of 1.1200 will drag the asset toward the psychological support of 1.1000. If cable surrenders the psychological support, it will expose to more downside towards October 12 low at 1.0924.

GBP/USD daily chart

GBP/USD

Overview
Today last price	1.1334
Today Daily Change	-0.0022
Today Daily Change %	-0.19
Today daily open	1.1356

Trends
Daily SMA20	1.1135
Daily SMA50	1.15
Daily SMA100	1.1835
Daily SMA200	1.2467

Levels
Previous Daily High	1.144
Previous Daily Low	1.1171
Previous Weekly High	1.1381
Previous Weekly Low	1.0924
Previous Monthly High	1.1738
Previous Monthly Low	1.0339
Daily Fibonacci 38.2%	1.1337
Daily Fibonacci 61.8%	1.1274
Daily Pivot Point S1	1.1204
Daily Pivot Point S2	1.1053
Daily Pivot Point S3	1.0936
Daily Pivot Point R1	1.1473
Daily Pivot Point R2	1.1591
Daily Pivot Point R3	1.1742

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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