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GBP/USD Technical Analysis: Cable Congestion, Rally to Resistance
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Talking Points:
GBP/USD Technical Strategy: Intermediate-term – congested; shorter-term bullish.
Cable has just run up to a new two-week high, but bulls may want to proceed with caution as this zone had previously offered resistance in the pair.
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In our last article, we looked at GBP/USD as price action had been rather direction-less of recent. As we noted, this appeared to be playing in the longer-term bout of congestions that’s taken place near multi-year lows after the tumultuous second half of 2016. This, of course, spans the ‘Brexit referendum,’ the ensuing dovish campaign from the Bank of England, and then the ‘flash crash’ in early October. But ever since those flash crash lows have come-in, GBP/USD has sputtered anytime a legitimate test of resistance has come into-play; leading to, in essence, four months of congestion.
Chart prepared by James Stanley
Within this congestion has been numerous attempts for prices to trend-higher; starting with the Bank of England’s Super Thursday in early November. When the BoE shifted inflation expectations-higher, price action in the British Pound attempted to break-out higher, but resistance came in at 1.2775, which is very near a prior level of swing-support. Since then, price action has been unable to set any new high’s or lows, leading into what has been, in essence, four months of congestion in Cable price action.
Chart prepared by James Stanley
On a more near-term basis, we’ve seen price action in Cable rally up to a level of resistance that should further temper bullish excitement in the pair. The level of 1.2552 is the 50% retracement of the major move spanning from the September 22nd high down to the low on January 16th (excluding the ‘flash crash’ low).
Chart prepared by James Stanley
For those that do want to push an aggressively-bullish stance, a sustained break above the February 9th high (1.2582, the same ‘activator’ level looked at in our last article) could open the door for such an approach. At the very least, this would show that bulls may be gaining some level of conviction on a longer-term basis that could, potentially, continue for a bit.
For those that want to take a more conservative stance on a market that’s been rather choppy of late, breaking above that longer-term level of resistance at 1.2775 could make such a prospect more probabilistic, as this could finally signal some element of resolution with this choppy price action that Cable has been exhibiting.
--- Written by James Stanley, Analyst for DailyFX.com
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