I’ve been keeping an eye on GBPUSD in 2014 and wrote about the pair a few weeks back (which you can read here). In those pieces I talked about the cap that the Monthly 200 period Moving Average has presented around 1.6635. Price hit those levels…and then promptly sold off.
Well after a nice sell off a couple of weeks back, price pulled back and has in the last 24 hours assaulted that level again. See monthly chart below:
Price is presently above that level (around about 1.6650 -60) as of 1400 UK time. Clearly I need to see it close on a weekly level above those levels and then again on a monthly close to give me some confirmation that GBPUSD is ready for a strong breakout. Remember the 200 Monthly Average has provided strong resistance back in 2011 and also in 2009. Closes above it will give us confidence.
On a weekly basis price pulled back to a confluence of the weekly 20MA and a support zone around 1.6250 before bouncing nicely and heading north strongly after NFP last week and Carney’s comments earlier in the week.
Not surprisingly weekly closes above the 2014 high (1.6666) will give us further confidence of a GBP breakout.
When we look at the daily chart below we can see how price dropped from its highs and pulled back into that 1.6250 support zone before providing some nice rejection candle action. (It also provided a UTB123 Long on the 4 hour chart). Getting Long after the NFP numbers was a good opportunity.
My STAM Matrix still has GBP has the strongest currency across the board. However I still want to see it closing above the 1.6650 levels on weekly and monthly basis. That will give us some interesting opportunities to look for a leg-up in GBPUSD. Alternatively if the 200 MA caps this rally again then we’ll once again see a fall back to those 1.6250 levels. As always we just let the market play its hand and trade what we see.