The GBPUSD struggled to overcome former channel support once again during yesterday’s session. This is an upward sloping pattern that we discussed over the weekend and one that also capped last Wednesday’s advance.
In fact, yesterday’s high was 1.2940 which is the same level I pointed out just before Monday’s open. Whether or not this area continues to reject advances is yet to be seen, however.
Unlike channels that form against the trend, upward and downward sloping flags often represent exhaustion. Notice how the channel in the chart below developed in the same direction as the rally, which hints at exhaustion from buyers.
Yesterday’s retest of former support as new resistance may have offered a favorable opportunity to get short. However, if you did sell, it would be a good idea to take special precautions ahead of this Thursday’s main event.
In case you aren’t aware, this Thursday is the UK election. And while I don’t expect volatility to be anything like what we saw last June during the Brexit vote, the British pound will no doubt experience considerable volatility this Thursday.
Said differently, if you shorted yesterday’s retest it may be a good idea to cover your risk as soon as possible. As for me, I’m going to hold out to see what we get following the UK election.
As mentioned over the weekend, as long as the 1.2940/50 area holds as resistance on a daily closing basis, my bias will remain weighted to the downside. Interim support comes in at 1.2860 followed by 1.2770 and 1.2670.
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