#GBPUSD #Bearish #BreakoutAbound
In today’s trade idea we are looking at GBPUSD for a potential bearish breakout below its ascending channel.
The cable finally found some direction today after being stuck in a narrow range of less than approximately 120 pips during the festive season. GBPUSD fall as much as 140 pips today before it repels the 50-day SMA, and it is now trading below the 1.2000 handle.
GBPUSD is trading at the current level for the first time in a month. Is this an indication that the dollar will make a comeback? Nonetheless, what attracted our attention was the potential for a breakout to the downside of its ascending channel.
Our preference is primarily based on technical analysis.
- A bearish breakout from a 10-day consolidation range
- Price breached below the boundary of the ascending channel
- The pair has been trading on the upper end of the channel for a prolonged period. After a fakeout above the 50% Fibonacci retracement level, the pair quickly plummets
- It is also now trading underneath its 200-day SMA
Crumbling health services and strikes that are happening in the UK are hurting the Pound, which also serves as added confluence to our case.
It is not all clear for the sellers though. The sellers still need to contend with the 1.1840 support level which also happens to be the 38% Fibonacci retracement level. If these roadblocks are dealt with, we could see the pair continue to decline to the 1.1500 psychological level.
Although traders are starting to return to their workplaces, the volume is still lower than optimal. The upcoming US PMI data and FOMC minutes should be kept in mind if you are trading.
Financial Market Analyst
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