GBP/USD Technical Outlook
- Cable faces a critical support level
- Levels and signals to consider
GBP/USD Price: Bulls Pull Back
Last week, Cable hit a near nine-month high at 1.3481. However, the price retreated after and closed a weekly candlestick in the red with a 0.8% loss as some bulls seemed to cut back.
Alongside that, the Relative Strength Index (RSI) fell from 69 to 55 highlighting that bullish momentum was losing steam.
GBP/USD Daily Price Chart ( June 2- September 8, 2020 )
Chart Source: Webtrader, Capex.com
At the start of September, GBP/USD failed to rally to the higher trading zone then pointed lower eyeing a test of the low end of the current 1.3048- 1.3484 trading zone.
It’s important to note the price and RSI divergence as the former created a higher high, while the latter created a lower high, signaling a possible reversal of the upward trend.
A daily close below the low end of the current trading zone 1.3048 reflects further hesitation from bulls and may send the pair towards the monthly support level at 1.2727 (December 2016 high).
Meanwhile, a failure in closing below the low end of the current one may reverse the pair’s direction towards the high end of the zone. A further close above that level could encourage bulls to push GBPUSD even higher towards the monthly resistance at 1.3710 (March 2018 low).
GBP/USD Four Hour Price Chart ( August 20- September 8, 2020 )
Chart Source: Webtrader, Capex.com
Today, Cable broke below the bullish trendline support originated from the August 12 low at 1.3004 highlighting a weaker bullish sentiment.
To Conclude, while bullish bias is still in place a price/RSI divergence provides a good base of a possible reversal on the horizon. Therefore, a break below 1.2962 could send GBP/USD towards 1.2868, while a break above 1.3320 may trigger a rally towards 1.3457. As such, the daily support and resistance levels marked on the four-hour chart should be monitored.
