Economy Forex

GBP/USD: Pulls away from four-week lows

  • GBP/USD witnessed heavy selling for the third consecutive day and fell to almost one-month lows.
  • Extremely oversold RSI on the hourly charts helped limit any further losses, at least for the time being.
  • Bears could still aim to challenge the 1.3600 mark ahead of the yearly lows around the 1.3570 area.

Following the American session, GBP/USD dropped to fresh four-week lows around 1.3650, although it quickly recovered a few pips. Almost 0.50% was lost on the day as the pair traded around 1.3675.

In addition to the expectations of an imminent tapering announcement from the Fed, the US dollar received an additional boost from the risk aversion in the markets. Consequently, GBP/USD fell for the third consecutive day, marking the fourth session with a negative move in the previous five.

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The sustained break and acceptance below the 200-period simple moving average on the 4-hour chart on Friday was seen as a key factor for bearish traders. A subsequent drop below the 1.3730-35 and 1.3700 horizontal supports exacerbated the selling pressure, which contributed further to the strong bearish momentum.

The extremely oversold RSI on the hourly charts, however, has kept losses in check despite the absence of market-moving economic releases from either the U.K. or the U.S. Although the near-term bias remains firmly in favor of bearish traders, it supports the prospects of an extension of the recent sharp pullback from levels beyond 1.3900.

A subsequent drop towards the 1.3620 intermediate support, en route to the 1.3600 mark, remains possible. This coincides with the August monthly lows, below which the GBP/USD pair is likely to extend the downward trajectory towards challenging lows, around the 1.3570 region touched on July 20.

Meanwhile, any significant recovery attempt near the 1.3700 round figure mark could be viewed as an opportunity for selling. In turn, the GBP/USD pair should put an upside stop near the 1.3730-35 support breakout point. Bulls could regain 1.3800 if a sustained move beyond triggers a short-covering move.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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