European Union Foreign Exchange

GBP/USD closes downside gap & looks neutral-to-bullish in short term

GBP/USD managed to close Monday’s downside opening gap, rallying back above the 1.3100 handle.

The MACD has flattened slightly above its red signal line and in positive territory, while the RSI has somewhat improved but continues to hold near its 50-neutral mark, both suggesting a neutral-to-positive bias in the short-term. Trend signals are also positive as far as the 20-day (simple) moving average (MA) continues to increase its distance above the 50-day MA and the price trades above the Ichimoku cloud.

gbp/usd forex 16102018

An extension higher is expected to find immediate resistance around 1.3216, a frequently approached level in the past five months. Slightly above market actions may retest the area between 1.3256 and 1.3297 formed by the peaks on October 12 and September 20 respectively, while in case bulls overcome that obstacle too, the next level to watch could be July’s high of 1.3361. Additional gains above that mark would confirm that the rebound off 1.2660 is sustainable and thus the upward trend may continue.

Alternatively, a dip in the price may meet support around the 1.3100 psychological level, while lower the 1.3048 mark which restricted both upside and downside corrections in the past would be in focus as well. In case of steeper declines, bears may target July’s trough of 1.2956 ahead of the 1.2922 bottom on October 3.

In the medium-term picture, GBP/USD remains neutral as long as the 1.3161-1.2660 range holds active.

by Christina Parthenidou, XM Investment Research Desk

Christina joined the XM investment research department in May 2017.

She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.

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