FX.co ★ Sud | GBP/USD

GBP/USD indicates that the market is structurally constructive even though the market consolidated in the recent past at critical resistance levels. Price action has been building up through an oversized upward corrective phase after recovering off the 1.3009 low. The base that was formed has been yielding more swing lows since that time and it is a confirmation that there is buy interest on the dips and the market structure has changed to something other than a strictly bearish market structure. The existing trading area of 1.3450 puts the price in the upper half of this corrective structure implying that bullish control is not lost, but yet the momentum has decelerated as the price nears a significant resistance band. Trend-wise, the market is honoring an increasing short-term structure characterized by an increasing zone of dynamic support around the area of 1.3410. Any price retention at this point will support the notion that the recent repurchase is corrective and not the beginning of a more significant bearish reversal. The retraces that have taken place in the past few sessions have been shallow with buyers intervening above the minor swing low points. Such action is an indication of a healthy bullish construct, with price corrections being made by consolidation as opposed to sharp downside movements. Resistance level stands at 1.3494 which is technically an important level of the market and a major decision point. This move coincides with the 61.8% Fibonacci re-tracing of the larger decline, 1.3794 to 1.3009 and has already capped gains made. Several candles a day have ranged above this zone but have not managed to close distinctly above this zone, which implies that the supply is concentrated here. Structural continuation of the bullish correction would be indicated by a clean daily close above 1.3494 and would probably open the way to the 1.3600 psychological level and then the previous swing area at 1.3700. Until this breakout happens, the follow through in upside might be limited. On the negative side, the nearest support is at 1.3410 where the increasing 20-day moving average coincides with previous consolidation. This is a near-term balance zone and has also served as a price magnet on minor pullbacks. A bullish structure would still be observed even when it falls under this level although under a controlled way in as much as it stabilizes and remains above it. Under this there is secondary support at about 1.3340-1.3320 that represents a past breakout zone and a higher low in the overall corrective trend. The daily close below this zone will dilute the bullish pattern and raise the chances of a further recession into the 1.3250 zone. The larger trend formation is one of recovery and not complete reversal in the trends. Although the market has improved in terms of the 1.3009 low, the market price has not yet regained the upper previous major highs towards 1.3800. Consequently, the existing structure may be considered as an upward correction in a bigger range environment. This setting is the reason of reluctance towards resistance and the price tendency of consolidation instead of increasing deeply faster. The progressive character of the move justifies the belief that the bullish influence is not aggressive, which adds the significance of the significant technical levels to the direction of the price movement. This interpretation is supported by the RSI holding of an almost 60, which is a structural interpretation. The momentum is positive but less hot than the previous peaks which is consistent with the sideways to slightly upwards price action towards the resistance. Such a balance implies that the market is digesting new wins and not allocating on the offensive. In case price still retains above the 1.3410 support and squeezes below the 1.3494, the result is a possible resolution in an upward direction in accordance with the short-term trend. To sum up, GBP/USD is currently ranging in a positive bullish correction characterized by the increasing bottom and strong support at the level of 1.3410. The main obstacle to further upward movement at 1.3494 will dictate whether the market will be able to scale to greater levels and stagnate or not. Pullbacks will be considered as corrective as long as the price remains above the rising support structure. Nonetheless, a lack of breaking and holding beyond the resistance would leave the two susceptible to new challenges of resistance areas, and an environment of ranges would persist and not an ultimate bullish continuation.