GBPUSD is at a crossroads.
On the one hand, the pound is hovering just above key support at 1.2700. I mentioned this level last week and again on Sunday.
And on the other, yesterday’s session tested a short-term resistance level that could be pivotal in the coming sessions.
In my opinion, that resistance level is what buyers need to break to push GBPUSD higher.
If they can’t, the 1.2700 support area will fail within days.
It’s likely going to take a daily close either way though. I wouldn’t want to trade a GBPUSD breakout on the intraday time frames.
By “daily close” I’m referring to the New York close at 5 pm EST. Click here to get access to the same charts I use for trading price action.
The reason for that is two-fold.
The first is that the 1.2700 area is more than just a horizontal support level. It’s the 560-pip range support that’s been intact since August.
A level that significant requires a daily close beyond it to confirm the breakout.
The second reason has to do with pound volatility.
Although the Brexit rhetoric has slowed recently, the potential for increased volatility is alive and well.
Waiting for a daily close beyond one of the two levels highlighted below will help confirm the breakout.
It also removes most of the “noise” commonly associated with intraday charts.
A close above trend line resistance would expose 1.2880 followed by 1.3070.
It may even be enough to resume this 560-pip range and re-expose the 1.3260 resistance area
Alternatively, a close below 1.2700 would target 1.2570 followed by 1.2410.
Be sure to review my GBPUSD commentary from last week. In it, I discuss the significance of 1.2700 and what a break below it would mean for the pound.
Note: the chart below shows the 4-hour time frame, but I will require a daily close beyond support or resistance.