Over the weekend we discussed how the GBPUSD had taken out trend line support on August 17th. The 1.2880/90 area was then retested as new resistance between August 18th and the 21st.
Monday’s gains were quickly erased on Tuesday when sellers stepped in at 1.2900. However, they quickly hit a wall of buyers at 1.2770. To be more precise, the level I showed over the weekend was 1.2773. Yesterday’s low was 1.2774.
So far, it seems the GBPUSD is respecting the levels we’ve had outlined for some time now. And with the pair in rally mode today, a retest of the 1.2970 area could be in store for next week.
As things stand today, a move higher would test the confluence of resistance that now exists at 1.2970. A sell signal from the area could offer up a chance to get short for a move back to 1.2770 and perhaps 1.2615.
Alternatively, a daily close (5 pm EST) back above the 1.2970 handle would negate the bearish bias. It would also expose the July 18th high at 1.3125.
I’m going to stay on the sideline until a favorable opportunity presents itself. If buyers fail to retest the 1.2970 area next week, a daily close below 1.2770 could provide a bearish setup just the same.
Keep in mind that Wednesday features the ADP employment change and prelim GDP figures for the U.S. As usual, the main event for next week is Friday’s non-farm payroll at 8:30 am EST.
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