The $1.32 Resistance Rejects Sterling’s Uptrend Throughout the Week
Prices rose to a high of $1.317 on Friday, July 31st, only a few cents below where GBP was trading before the global financial turmoil began.
As a new week was about to start, investors seem to have taken profits over the weekend. The increase in supply pushed the GBP/USD trading pair down by 0.73%.
Thus, the Pound kicked off the week of August 3rd at $1.309 while sell orders continued to pile up. The selling pressure was significant enough to send it further down by 0.53%. By 13:00 UTC, Sterling had reached an intraday low of $1.301. Nevertheless, this support level served as stiff resistance allowing it to rebound 0.80% to hit a high of $1.311 the following day.
Even though it seemed like the GBP/USD trading pair was bound for further gains, a sell-off took place on August 4th. Between 7:00 UTC and 12:00 UTC, the Pound plunged 0.97% to a weekly low of $1.298. This support level was met with a significant number of buy orders, which allowed it to enter a new uptrend.
Sterling went through a bull rally the next two days that saw it rise 1.57%. As prices took another aim at early March’s high of $1.320, this resistance zone was able to hold steady once again. The rejection resulted in a 1.34% nosedive, and the Pound hit a low of $1.301 a few hours before the weekly close.
Like it happened on Monday, August 3rd, this support level prevented GBP from a steeper decline. The rebound enabled prices to recover by 0.30%, and Sterling closed the week at $1.305. Despite the high levels of volatility seen throughout the week, the Pound only provided investors a weekly return of 0.20%.
More Losses to Come?
Even though the Pound did everything to reach a new 5-months high, the overhead resistance was able to hold steady. The way Sterling was rejected by the $1.32 barrier must be concerning for those betting to the upside. With multiple technical indexes estimating that the GBP/USD trading pair is poised to retrace, the chances for a downturn are currently high.
In the event of a downswing, investors must pay close attention to the $1.301 support level. This price hurdle poses a lot of significance to the Pound’s uptrend. Staying above it increases the odds for another upswing towards the $1.32 resistance.
However, moving past it may trigger panic among investors. An increase in the selling pressure behind Sterling could see it drop towards $1.281 or even $1.272.
Given the ambiguity the Pound presents, traders must pay close attention to the $1.301 support level. The strength of this supply barrier will determine where GBP is headed next.
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Konstantin Anissimov, Executive Director at CEX.IO
This article was originally posted on FX Empire
