By Jameel Ahmad, Chief Market Analyst, FXTM
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Traders were once again encouraged that the 1.51 level for the GBPUSD was a probable “bottom” this week after the pair rallied strongly away from this level, and towards a two-week high at 1.5320. The GBPUSD continues to trade with high volatility, but the technical traders are probably enjoying some of the present opportunities available. Not only is 1.51 looking like very stubborn support, but the daily timeframe points to the GBPUSD strictly abiding to its Simple Moving Averages (SMA).
Despite the significant 200 pip rally over the previous two trading days, the daily timeframe shows that the pair is now facing heavy resistance at 1.5328 with this not only being Wednesday’s high, but also the 200 SMA. If the GBPUSD is not able to surpass this resistance, there is actually a technical threat of another sharp pullback towards the 1.51 support. There is a risk for another sudden shift of momentum on the GBPUSD if Thursday’s Bank of England (BoE) interest rate decision suggests that the central bank will delay raising UK rates until far into the second half of 2016.
What happens if the GBPUSD continues to rally? There will be some anticipation over whether the pair can make its way towards 1.55 but this could be blocked by the 50 and 100 SMAs, which are between the 1.5436 and 1.5488 levels, respectively, on the Daily timeframe. At the end of the day, and if you are a long-term investor in GBPUSD, you are likely going to want to wait until the pair surpasses its moving averages before gaining confidence that there is further potential for the GBPUSD to enter a stronger rally as we continue into the final quarter.
Further USD weakness would help these chances, although we have noticed very recently that any risk-off attitude from investors can strongly damage investor attraction for the GBPUSD.
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