GBPUSD bulls are on the move this week following Friday’s rejection candle.
The pair had broken above this descending channel back on the 25th of January.
However, buyers were unable to support the elevated prices, and by February 4th, GBPUSD had closed the day back below the key level.
Then came Friday’s bullish rejection candle. I mentioned the pattern in Sunday’s weekly forecast.
It wasn’t the ideal buy signal given the somewhat long upper wick. Even the level in question had failed to serve as support earlier this month.
But as we can now see, Friday’s bounce from the 1.3000 support handle was enough of a technical catalyst to send the pound higher this week.
Yesterday’s 160 pip rally took out a key horizontal level at 1.3200.
This was the location of the late January high. In fact, before this week 1.3200 was the year-to-date high.
With GBPUSD now firmly above 1.3200, any rotation lower will likely encounter support from buyers.
The next key resistance is one I’ve mentioned several times recently.
A look at the price action between May and June of last year illustrates why the 1.3440 area is one to watch.
You can even see how 1.3440 had its way with GBPUSD following the June 2016 Brexit vote.
Notice how buyers failed to clear 1.3440 between late June and early September of 2016.
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I also have reasons to believe that 1.3300 could play a role this week.
Notice the session highs and lows in the last two months of 2017. The 1.3300 area even served as resistance during the second half of 2018.
The GBPUSD is too far extended to think about buying up here, at least in my opinion.
However, a rotation lower to 1.3200 support could offer a favorable buying opportunity.
Keep in mind, however, that resistance lies at 1.3440 with another level at 1.3300 that could affect today’s session.
Last but not least, the pound will continue to be a volatile currency to trade given the ongoing Brexit debate.
If you do trade GBPUSD, you’ll want to stay particularly vigilant.