GBPUSD fell sharply last week losing 2.4% of its value . However, today has seen a rally into resistance, which may provide a low risk short opportunity.
Preliminary GDP q/q is due out tomorrow and is forecast to show zero growth. However, manufacturing production is expected to show an increase on a month-on-month basis. The market will also focus on the Cabinet reshuffle taking place towards the end of the week. Given these uncertainties, the price action is interesting.
GBPUSD Rallies Into Confluence Of Resistance
The left chart shows cable’s daily timeframe. The currency pair is trading beneath its black 20-day SMA. Moreover, the SMA is pointing southeast, suggesting a downwards bias to momentum. This is also reflected in the RSI which is on the bearish side of 50 (blue rectangle). Given this, the hourly chart on the right makes for absorbing analysis. Here we see that GBPUSD has rallied towards the R1 pivot around the 1.2934 level. This coincides with price support turned resistance (red shaded horizontal) and is close to the 76.4% Fibonacci retracement of the previous impulse move down. This confluence of resistance, given the daily downwards bias, may prove to be an area that short-sellers target.