Will GBPUSD target the 1.3700 imbalances, and if so, how far might the pair pull back first?
Get the details in today’s video, including the key levels to watch this week for the DXY.
GBPUSD is pulling back to start the week following an aggressive US dollar selloff on Friday. The pair struggled to hold above 1.3530 on Monday, leaving the pound range-bound between 1.3530 and 1.3470.
The DXY is testing a critical resistance area at 98.00. It’s the bottom of the July channel, which the US dollar lost during Friday’s selloff. The 98.00 area is also the value area low for August, making it even more significant.
Given the relatively light event calendar this week, the immediate direction for GBPUSD remains unclear.
However, for GBPUSD bulls to target the 1.3700 imbalance from July, they first need to clear the 1.3530 resistance area. Above that is the more significant 1.3580 level from July.
There is also an imbalance at 1.3433 that could come into play for GBPUSD. But as discussed in Monday’s video, a retest of 1.3433 would likely put the DXY back within its July channel.
All in all, a wait-and-see approach for GBPUSD makes sense. A sustained break above 1.3530 on the 4-hour time frame and higher would expose 1.3580, with a break above that targeting those 1.3700 imbalances.
On the other hand, a DXY reclaim of the 98.00 region could send the pound lower toward its 1.3450-1.3470 support and possibly the 1.3433 imbalance.
Between these two scenarios, I prefer to see a bullish move from GBPUSD to target 1.3700. But as always, time and price will be the deciding factors.
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