In my last article, I noted a possible top in the GBP/USD pair at the 1.62 level, and was possibly seeing a bearish trend start to setup. From 10/21: Within that up-trend, there is some failure occurring within the trend back up to its upper band. Friday, the candles put in a top/bearish doji, and so far today, the pattern is confirming with followed-thru downside.
This pullback occurred, and sold off to a low of 1.59, right at our previous target. Now at this support level, where is the pair going next. Since that 1.59 low, we have trended back up somewhat, currently trading around 1.596. Based on the break of the up-trend, the pair now hovering at its 50-Day Moving Average is essential to hold for the pair to hold a new possible up-trend. The pair would need about 1.61 to regain that 3-Month up-trend, which will then test that 1.62 level again.
RSIw is still on a bearish trend since the peak on 9/18, when the pair rose from 1.59 straight to 1.61, similar levels to where we are now. RSI is still trending from “the upper left to the lower right” since that peak, which bodes well for the bears from a trend perspective. With this current hold at 1.59, RSI is also holding up, but looks more like a head fake unless the indicator can take out the 50 level. MACD is on a similar bearish trend, with a major bearish crossover in early October. The divergence tried to break for the bulls towards the end of October, but failed to do so. The divergence is now building on its bearish trend, and the indicator is falling towards the 0 handle. Until this trend is broken, MACD looks to be going negative, which could drag the pair down further.
GBP/USD has support at 1.57, and currently I am moving my target down to this level. A break above 1.60 could change my direction, but right now this hold at 1.59 and bounce looks to me more of a short-term bounce. From there 1.55 is also an important level to hold. From different resistance and support levels here, as well as support within its current up-trend.
Trade Idea: Short side with 1.6050 as a stop, just above the high from Friday. Would target 1.571 to start taking profits. More extreme, if we can’t hold 1.57, 1.55 is the next level the pair could test.
