GBP/USD Weighed Down on Retreat from Highs

<p>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 […]</p>

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.

GBP/USD Daily Chart

 

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.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.