On Sunday, I mentioned how the 1.3070 area might be a significant one for GBPUSD. Given the pair was trading below it at the time, it meant 1.3070 was resistance at the start of the week.
But buyers didn’t hesitate during Tuesday’s rally. The pound went on to close the session above 1.3070. Wednesday’s session then caught a bid from the area which helped confirm the area’s significance.
That ended rather abruptly yesterday. GBPUSD bulls surrendered 1.3070 as new support following the 1.3060 close. Remember, I use New York close charts which you can get by going here.
Today’s session has come under some pressure, but not enough to test the resilience of sellers. Update: That’s changed since I started writing this post with GBPUSD now under quite a bit of pressure.
So we’re left asking, how significant is 1.3070?
Said differently, does yesterday’s close below it suggest a move lower next week?
We don’t have enough evidence to make that call just yet. However, I will say that I believe the 1.3070 level is a significant one for the pound. It’s broken down a few times in the past, but the area has served as a pivot of sorts going back to the June low.
Some weakness here next week would agree with what we’ve seen so far from the EURUSD as well. Granted the pound has been the stronger of the two since late August, but the idea of a stronger U.S. dollar is present nonetheless.
The counterargument to a weaker GBPUSD is the aggressive bounce from 1.2700. But let’s not get ahead of ourselves.
Yes, the pound has been on a tear since October 31st, but the weekly time frame tells a different story.
Despite buyers’ best efforts, they’ve been unable to reverse the downtrend that began with the massive bearish engulfing week in April.
I see the last three months as nothing more than consolidation. In fact, the price action since mid-August looks eerily similar to the range that developed between late June and September of 2016.
That’s just an observation. I’m not suggesting GBPUSD is about to give up 1,000 pips in a single week.
To be confident that yesterday’s close below 1.3070 was significant, we’ll need to see sellers defend it as new resistance. That hasn’t happened yet, so for now, it’s a waiting game which is just as well given that it’s Friday.
Another thing to keep an eye on is how this week finishes up. Right now, sellers are on the brink of carving a 200-pip bearish pin bar on the weekly chart.
If sellers can secure a close below 1.3000 today, we may have a bearish signal going into next week. As always, I’ll be sure to provide an update on Sunday before the market opens, so be sure to sign up for alerts.