The GBPUSD just tested a former multi-year resistance level as new support. We’ve discussed the 2014 trend line several times in recent weeks including the November 29 close above it.
As you can see from the chart below, GBPUSD bulls reacted almost immediately when today’s session hit a low of 1.3318. That’s approximately 35 pips below the 2014 trend line that had it’s way with the pair back in September.
The big question now is what happens throughout today’s session. Yes, the pair has bounced from former resistance and is carving a bullish pin bar, but will it close this way?
The answer to that question will remain elusive until the session close at 5 pm EST. Remember, I use New York close charts which gives me five 24-hour periods every week.
I should also point out that we could see an influx of selling pressure near the 1.3445 area. It’s a level that served as a pivot in late September and could cause some issues for bulls going forward.
I’m hesitant to declare an all out bullish bias here given what’s happened with the U.S. dollar recently. You may have seen my USDCHF commentary the other day, and the USD Index (DXY) is behaving similarly.
If the greenback continues to strengthen, it’s going to make things difficult for GBPUSD buyers. The pair could still make some headway, but gains may be limited, and the price action could become choppy.
Trading currencies successfully is about pitting the strongest currency against the weakest. With that in mind, I’m not so sure the GBPUSD is the ideal candidate, especially considering some of the other opportunities that have cropped up this week.
Still, as long as the 1.3330/50 area holds as support on a daily closing basis, the potential for additional gains should not be ruled out. Key resistance comes in at 1.3445 and 1.3640/50 with a minor area near 1.3550.
On the flip side, if GBPUSD bulls lose former trend line support at 1.3330/50, any notion of further gains will be lost.