GBPUSD Targets Confluence of Support at 1.3020

The GBPUSD is retreating today after testing key resistance at 1.3250. We discussed this level over the weekend as one that could produce an opportunity to get short.

Unfortunately, there wasn’t a sell signal on the 4-hour chart. So unless you had a limit order in place near the 1.3250 handle, you are likely still on the sideline.

That isn’t necessarily a bad thing, though. As I mentioned in the weekly forecast, I think the larger opportunity here is a break below the 1.3020 area. It’s a combination of horizontal support and the channel floor that extends from the March low.

Here’s how the last seven months have shaped up:

As you can see, the GBPUSD has carved a seven-month ascending channel. The most notable development during this period was when the pair tagged the 2014 trend line in September. Time will be the judge, but that may have been an incredibly significant rejection.

If you’re still on the sideline, the best approach might be to wait for a daily close (5 pm EST) below the confluence of support at 1.3020. Such a close would expose the August low at 1.2770. A break below that would target the June lows near 1.2615.

The longer-term target for an ascending channel is usually the pattern’s low. In the case of the GBPUSD, that would be the March low just above 1.2100. However, keep in mind that a move of that magnitude would take several weeks if not months to play out.

But sellers first need to secure a daily close below the 1.3020 area. Without that, the pound sterling will likely remain range bound between 1.3020 support and 1.3250 resistance.

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