From the weekly perspective, we see that GBP/USD climbed higher and hit a fresh 2014 high. Despite this bullish sign, the exchange rate still remains below the strong resistance zone created by Aug. and Nov. 2009 highs, which may pause or even stop further improvement.
To have more complete picture of the current situation in GBP/USD, let’s take a look at the daily chart.
On the above chart, we see that GBP/USD extended gains and broke above the resistance zone created by April and 2014 highs. However, as it turned out in the following hours, the pair reversed and slipped below the previous highs, invalidating earlier breakout. An invalidation of a breakout is a bearish signal, which might trigger a bigger decline. If this is the case, the initial downside target for the sellers will be the previously-broken green medium-term support line (currently around 1.6727).
- Very short-term outlook: bearish
- Short-term outlook: mixed with bearish bias
- MT outlook: bearish
- LT outlook: mixed
Trading position (short-term; our opinion): Short. Stop-loss order: 1.6855. Please note that if the pair moves above our stop-loss level, it seems that it will rally some more before heading south once again. If this is the case, we’ll consider re-opening short positions around the 2009 high.