In the view of Karen Jones, Analysts at Commerzbank, argues that the divergence of the daily RSI implies a loss of downside momentum and hence a corrective rebound towards 1.3274 cannot be ruled out in GBP/USD.
Key Quotes:
“GBP/USD last week charted a new low at 1.3049, which has been accompanied by a divergence of the RSI. The market appears to have reversed just ahead of strong support offered by the 1.3040 October 2017 low. The divergence of the daily RSI implies a loss of downside momentum and we would allow for a corrective rebound near term towards the 20-day ma at 1.3274 and possibly the 1.3400/10 area. Should a recovery above the 20-day ma at 1.3274 be seen, this would allow for a corrective rebound into the 1.3440/1.3540 band and there is scope for the 1.3591 200 day ma (although this is less favored..
Below 1.3040 would target the 50% retracement at 1.2918. Below 1.2918 would be treated as the breakdown point to 1.2580, the 61.8% retracement from 2016.”
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