GBP/USD Bounces Back From a Five and a Half Month Low
Price action in GBP/USD was volatile last week. The exchange rate dropped in the early week to levels not seen since early January. However, the pair reversed sharply, on the back of a weaker dollar, and nearly made a one month high.
A resistance level has come into play and seems to be capping the upside in early European trading. The level falls around 1.2750 and has held the pair lower on several occasions since it fell below it around the middle of May.
An upside break stands to accompany an acceleration in the pair. Several of the Majors are showing similar type of price action and momentum as a result of a weaker dollar.
The greenback reversed lower last week after the Federal Reserve took a more hawkish stance at their central bank meeting. The trade-weighted dollar index (DXY) dropped about one and a half percent last week.
GBP/USD might struggle to move higher in the short-term, considering the resistance in play and a generally light economic calendar. Consumer confidence figures will be released from the US on Tuesday. Fed members Powell and Bullard are also scheduled to speak later that day.
On a 4-hour chart, GBP/USD is seen struggling at the above-mentioned resistance. So far, the 200 period moving average has held the pair higher following a small sell-off in early day trading.
I see some support around 1.2655 which also carries a confluence with the 100-period moving average. Although, I would be a bit surprised seeing the pair decline that much today considering the recent upward momentum. Ahead of the level, I see support at 1.2695.
On an hourly chart, the same 1.2655 level comes into play with the 200-hour moving average offering confluence. Once again, I would first look to the 1.2700/1.2695 area to see if it offers a bounce.
In the event of an upside break, I see resistance at 1.2813. The level marks a spike high from late May.
- GBP/USD is holding below a major hurdle at 1.2747. It will need a break higher from this level to regain upside momentum.
- The economic calendar is light today, but headline news can still impact the pair.
- Levels I’m watching are 1.2695 followed by 1.2655.
This article was originally posted on FX Empire
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