GBP USD Weighed Down on Retreat from Highs

GBP/USD (daily chart shown below) has continued for the past week to be weighed down after beginning a pullback from its year-to-date highs. This pullback brought the currency pair down from its 2015 high of 1.5928 that was reached a week ago on a sharp rebound and bullish recovery.

That high represented a 50% bullish retracement of the previous downtrend from the five-year high of 1.7190 in July of 2014 down to the four-year low of 1.4565 this past April.

Since that multi-year low in April, the currency pair has climbed substantially and has generally outperformed the other major currency pairs, with the exception of a deep pullback down to 1.5250-area support in the latter half of May.

From early June, GBP/USD saw a steep incline that pushed above the 1.5900 resistance level to reach the noted 2015 high of 1.5928.

During the course of this rise, in mid-June the key 50-day moving average crossed above the 200-day average for the first time since the beginning of a bullish trend in late 2013. Despite this bullish technical indication, the currency pair had become significantly over-extended to the upside and subsequently retreated from its year-to-date highs.

While the recent trend for GBP/USD has clearly been bullish, the current pullback could well have further to run to the downside on any sustained dollar strength.

If the currency pair continues to trade under the 1.5900 level, the key downside target on an extended pullback resides around 1.5500, with a further downside pullback target around the noted 1.5250 support area.

To the upside, on any break back above the noted 2015 high, major resistance resides immediately above at the key 1.6000 psychological level.