GBPUSD Back up above the 1.600

Key Highlights

• GBPUSD on a long term down trend
• GBPUSD finds support at 1.5950
• Analysis of the downtrend
• Retracement analysis
• Technical analysis

The GBPUSD has been on a major down trend since July of this year. We have trended down from 1.7100 to 1000 pips below at 1.5900. On Friday last week, cable found support against the USD at 1.5950 and has since then retraced over 100 pips up. The market is keen to see up to what point the retracement will go.

On the 5^th of September the prices gapped 150pips over the weekend and touched new low at the time of 1.6050. The bulls then drove the rates up over 450pips up above the 38.2% fib retracement but below the 50% level. Since then, we have gone below the 1.6050 level and touched a new low on Friday.

GBPU/SD H4 07-10-2014

We have now retraced to the 23.6% Fibonacci level and found some resistance. From the H4 chart, the 14 period moving average is trading below the 21 period moving averages. This is a bearish signal indicating that there is a likely hood of the pair to go lower. On the other hand, the 14period moving average is trading below the candle sticks and a hammer candle has just closed above it. This indicates that the bullish pressures on this time frame are quite significant. We are therefore likely to retrace even higher to the 38.2% Fibonacci retracement level.

Technical analysis

Monthly Chart

From the monthly chart the 14 period moving averages has just crossed the candlestick and is trading above them. This is an indication that in the long term the bearish momentum is quite significant and therefore prices will slide lower.

The Stochastic has approached the oversold region with a reading of 11.76. The RSI at 47.48 is giving a neutral reading indicating that that we are neither at oversold nor overbought conditions this signals that we are likely to have a continuation of the current down trend.

GBPUSD Monthly

Weekly chart

From the weekly charts the 14 period moving average is trading above the prices. This indicates that we should be anticipating the bearish momentum to continue.

The Stochastic at a reading of 17.81 is moving back to the oversold conditions. The RSI has just come out of the oversold conditions with a reading of 31.28. from these two indicators we conclude that the has been strong selling for the pair and even thought we are not exclusively at oversold territory we should anticipate the bullish pressures to get significant as we go lower.  This may trigger some buying in the short term and cause a higher retracement.

GBP/USD Weekly

Daily Chart

From the daily chart, the 14 period moving average has crossed above the candlesticks. This indicates that there will be resumption in the down trend since the downward momentum has begun to get stronger.

The stochastic is coming out of the oversold region with a reading 28.23. The RSI is also emerging from the oversold region with a reading of 36.31. This indicates that the previous oversold conditions that are causing the retracement are now being exhausted and we can look for resumption in the downward trend soon.

GBP/USD Daily

Wrap up

We anticipate that the GBPUSD to trend down in the long term. In the medium term we anticipate that there will be some significant retracements as we enter oversold conditions. In the short term however we should see the pair slide lower.

Under these conditions a great trading approach is to sell the pair at significant supports and major double zero numbers targeting to catch the next major downward move.  

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