GBP/USD Rebounds after Testing Important Support31 January, 2018 by Aayush Jindal in Market Analysis
- The British Pound started a downside correction after trading as high as 1.4345 against the US Dollar.
- An important bullish trend line with current support at 1.4070 prevented declines on the 4-hours chart of GBP/USD.
- The pair is rebounding and is currently trading with a positive bias above 1.4100.
- UK’s GfK Group Consumer Confidence index in Jan 2018 rose from -13 to -9.
GBP/USD Technical Analysis
There were heavy gains this past week in the British Pound from the 1.3750 support against the US Dollar. The GBP/USD pair traded above 1.4200 and 1.4300 before starting a downside correction.
The pair traded as high as 1.4345 from where it corrected lower. The downside move was substantial as the pair moved down by around 350 pips and tested the 1.4000 support area.
On the positive side, losses were protected by an important bullish trend line with current support at 1.4070 on the 4-hours chart. GBP/USD bounced back sharply and formed a bullish hammer candle pattern, signaling a crucial rejection from the 1.4000 support area.
The pair recovered above the 23.6% Fib retracement level of the last decline from the 1.4345 high to 1.3978 low. The current price action is positive and the pair may continue to move higher towards the 1.4200 resistance area.
An intermediate barrier for buyers is near the 50% Fib retracement level of the last decline from the 1.4345 high to 1.3978 low. Above 1.4200 resistance, the pair will most likely resume its uptrend towards the 1.4300 level.
On the downside, the 1.4060-1.4070 support zone is crucial in the near term. The pair has to stay above the trend line and 1.4000 to avoid further declines.
Looking at the other major pairs, EUR/USD was stable above the 1.2350 support. On the other hand, the USD/JPY pair continues to face a lot of bearish pressure and it is currently trading below the 109.40 resistance. Finally, AUD/USD dipped recently to test yesterday’s highlighted channel support and bounced back above 0.8060.