The forex market remains indecisive, but the recent GBPUSD price action is promising.
In today’s analysis, I explain why GBPUSD looks promising and provide the key levels to watch. I also discuss the latest on the DXY so you can confidently trade the major currency pairs.
GBPUSD has consolidated since testing 1.3450 in late April. That’s the location of the September 2024 high that led to a 1,300 pip selloff, so it’s no surprise to see sellers defending it.
However, the current pullback is very different from last October.
Last October’s correction from 1.3450 was incredibly aggressive. GBPUSD dropped over 300 pips in just four trading days.
This time, it took GBPUSD weeks to retrace 300 pips after the April rally. The slope of the current pullback is also much less aggressive than last year’s.
The slope of a retracement can be telling. An impulsive rally followed by a slightly sloped retracement usually leads to another rally. The retracement is the consolidation that fuels the next leg up.
That’s the blueprint for a bull flag pattern, and GBPUSD appears to be on track.
However, the pound remains below channel resistance at 1.3340. The pair will remain vulnerable until the GBPUSD bulls secure a high-time frame candle above this.
Another factor is the DXY, which hasn’t made up its mind. The dollar index tested the 101.80 confluence of resistance recently but is catching a bid at 100.20. I’ve discussed both of these areas in recent blog posts.
So, any GBPUSD longs require the DXY below 100.20 for added confidence. The pound also needs to break the 1.3340 resistance area. If it does, we could see this uptrend tag 1.3450 again and some 2022 highs at 1.3630 and 1.3750.
The bottom line is that this GBPUSD consolidation looks promising for bulls, but there’s more work to do.
