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GBPUSD caught a bid this week at a level I mentioned on Sunday.
The short-term trend line that extends from the year-to-date low is propping up the pair at the moment.
However, buyers slipped yesterday after retesting the 1.3200 resistance level.
That area actually extends up to the 1.3300 handle.
One thing that has become apparent this week is the indecision plaguing the pound.
We already knew that was the case, but this week’s price action has confirmed just how uncertain the market is about the future direction of the currency.
Of course, the GBPUSD is being influenced by the ongoing Brexit drama on a day-to-day basis.
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That’s what has made trading the pair so tricky.
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Much of the future direction for the GBPUSD also rests on the shoulders of the U.S. dollar.
The greenback has been trending higher since February of last year, but I’m starting to see cracks in the bullish narrative.
In fact, USD bulls started having issues last December even though sellers haven’t followed through just yet.
As we know, though, that can change in a hurry.
It’s times like this that I look to the weekly time frame for clarity.
The chart above shows the price action over the last five and a half years.
That trend line resistance that broke in December of 2017 started back at the 2014 high, so we’re dealing with longer-term themes here.
Now consider this…
GBPUSD broke that long-term trend line in December 2017 but didn’t retest the level as new support until August of last year.
It’s clear that Brexit has played its part in keeping prices suppressed.
But the technicals since 2014 paint a very different picture than the bearish one you probably hear most often.
So what’s the key takeaway here?
Don’t discount the potential for a bullish GBPUSD.
There’s a lot of bearish rhetoric floating around the internet, but I’m not buying it.
Or should I say selling it?
Based on the technicals alone, GBPUSD has every chance of rallying in 2019.
I could be very wrong here. I’m also not in a hurry to buy the pound at current levels, mostly because of the choppiness below 1.3300.
If I want to take advantage of any USD weakness going forward, I would rather trade the more stable EURUSD.
That’s just personal preference though.
GBPUSD will likely need to climb above the 1.3300 range ceiling for buyers to find their footing.
A break above that area could easily take the pound to 1.3800.
Alternatively, a close below the short-term trend line could take GBPUSD back to ascending channel support near 1.2500.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.
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