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A bullish divergence and momentum shift at the lows saw GBP/USD reverse course. Now consolidating below key resistance, we’re waiting for a break above 1.24 to signal a potential long.
It should be remembered that GBP will continue to be vulnerable to headline risks surrounding Brexit, which can unfortunately make technical analysis on such pairs the more difficult. We’d also need to see the USD weaken for this to have a material impact on long GBP/USD.
Yet markets clearly are keeping an eye on the resistance zone just beneath 1.2400, so a clear break above here assumes we’re good to go to the long side.
Later today we have the University of Michigan Sentiment Index. It’s of more interest than usual, because it had such a negative print. If weak consumer sentiment is to be repeated, it could indeed have a negative reaction for the USD (initially at least) and help send cable higher.
We can see on the daily chart that USD/SGD’s decline has found support just above the 1.3114/24 support zone. As of yesterday’s close, bears have enjoyed 8 consecutive down days, making it the longest daily bearish streak since January 2018. Therefor it’s possible we could see prices consolidate or retrace before its next leg lower. However, RSI is not oversold and there are no signs of a bullish divergence on this timeframe, so we suspect there is plenty of downside potential should it break below 1.3700.
Interestingly, the decline from September’s high displays a similar velocity to the initial leg lower from the May high. If history were to repeat and maintain a similar structure to the 3-wave move in June, we could see prices rebound to 1.3825 before falling down towards 1.3620. Of course, as the saying goes “history doesn’t repeat but it does rhyme”, it’s unlikely we’ll get an identical move. But we can monitor to see if prices form a lower high before considering a swing trade short, or wait for prices to break below support before assuming a run for the 1.3620 area.
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