Technical Analysis – GBPUSD is not out of the woods yet
October 16, 2023 3:28 pmVideo
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GBPUSD bears take a breather near a key support line
Short-term bias skewed to the downside
GBPUSD started the week with small gains, which balanced out Friday’s decline but did not significantly improve sentiment as major resistance levels remain overhead.
The technical signals are currently mirroring a cautious mood in the market, with the RSI moving sideways below its 50 neutral mark and the MACD stabilizing around its red signal line. In the meantime, the stochastic oscillator keeps following a downward path towards its 20 oversold level.
Trend signals are not encouraging either as the 50- and 200-day simple moving averages (SMAs) are close to post a death cross for the first time since August 2021.
A negative extension below the tentative 2020 support trendline at 1.2100 could renew selling interest, pressing the price towards the 1.1980 region if October’s low of 1.2036 proves fragile. This is where the constraining line from November 2021 is located. Hence, breaking that floor, the sell-off could stretch into the 1.1900-1.1925 area and then target the 2023 trough of 1.1800.
On the upside, the bulls will have to crawl above the 20-day SMA at 1.2200 to re-challenge the crossover of resistance lines at 1.2325. A successful penetration higher could next stagnate near the 50- and 200-day SMAs at 1.2440, where the 38.2% Fibonacci of the latest downtrend happens to be. Breaching that border and running beyond the 1.2500 mark, the pair could easily gain access to the 50% Fibonacci of 1.2588.
All in all, the technical outlook for GBPUSD remains cloudy. A drop below 1.2100 could motivate more selling, while an upside reversal may not reduce negative risks outright, unless the price successfully claims the 1.2500 area.
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