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Bulls Back on GBP/USD from 1.2305?

May 26, 2020 at 8:36 by Dorin Rosu

The Great Britain pound versus the US dollar currency pair seems to be trying to rotate towards higher prices. Are the bears waiting for better prices, or the bulls already started a rise?

Long-term perspective

The robust fall that stopped at the 1.0409 low brought about an upwards swing until the important 1.2514 level, its confirmation as resistance being marked by the two highs, 1.2647 and 1.2643.

This limitation aided the formation of a consolidation phase which, after allowing both intermediary support levels, 1.2305 and 1.2198, to be pierced — thus sending the message that the bears might be in charge — ended up stopping any advancement towards the south once it hit the 1.2092 support.

Initially, the retracement from 1.2092 could have been considered a throwback that searches for a resistance level to confirm. But after that resistance was found in 1.2305, the bears lost their steam, letting the price get back above 1.2198 instead of maintaining course towards 1.2092.

So, the scenario of a double bottom formation sets the 1.2305 level as the neckline of the pattern. Consequently, if this level is validated as support, then the bulls could bring the price to 1.2514.

On the other hand, if 1.2305 keeps the resistance role, then the bears might write another fall to 1.2092. However, as the latter level is a key one, the bears might need to put a lot of pressure to pass it.

Short-term perspective

The descending trend that started at 1.2643 ended at 1.2075 after the price got out of the channel and printed the angled rectangle limited by the 1.2296 and 1.2155 high and low, respectively.

Since this chart pattern — which is one that indicates a possible continuation — is preceded by an appreciation, the continuation may take the shape of another leg towards the upside.

So, if the bulls manage to stamp the 1.2203 level as a support, then they could aim for 1.2282. On the other hand, if they would not explore this opportunity, then the bears can put more pressure and send the price under 1.2203. Once confirmed as resistance, 1.2203 can fuel a fall towards 1.2111, the first bearish objective.

Levels to keep an eye on:

D1: 1.2395 1.2514 1.2092
H4: 1.2203 1.2282 1.2111

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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