TA of the Day: GBP/USD Bullish Signs Emerge! Is a Trend Reversal Underway?

the US Dollar The Australian dollar fell against major currencies today as signs of easing inflation emerged, further supporting the possibility of a Federal Reserve interest rate cut in September.

The U.S. consumer price index, a key measure of inflation, rose 2.9% annually, just 0.1% below June’s rate.

This was a decrease In line The consumer price index fell below 3% for the first time since March 2021, in line with market expectations. This suggests that underlying inflationary pressures may be easing.

The Federal Reserve is working to control inflation, which has remained above its 2% target for some time.

Yesterday’s lower than expected PPI may have created high expectations for a lower than expected CPI report.

But the actual numbers released this morning were largely in line with expectations, reducing the likelihood of a 50 basis point rate cut in September and cushioning the blow to the dollar.

While the euro gained strength against the dollar, The reaction of the pound was mixed..

The volatile price action was also a result of UK headline inflation rising less than expected in July, along with a larger-than-expected fall in service sector inflation.

Although the GBP/USD pair closed slightly lower today, its technical picture looks cautiously bullish.

Welcome to Teaching Assistant of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of GBP/USD Based on the 4-hour chart:

📈 Technical analysis of the GBP/USD pair on the 4-hour chart

Using the technical analysis concepts we covered in our Forex course, let’s analyze GBP/USD.

Simple moving averages:

• 20 period simple moving averageIt is located at the level of 1.2800. The current price is hovering Around this level, indicating a possible short-term consolidation and an area of ​​interest. The slope is To the topreflecting recent short-term bullish momentum.
• 50 period simple moving averageIt is placed at the level of 1.2761. The price is: above This level indicates support for medium-term bullish momentum. The slope is To the topindicating a possible continuation of the upward trend.
• 100 period simple moving averageIt is located at the level of 1.2806. The price is: close This level, indicating that it is an immediate resistance or support level. The slope is neutralindicating a balance between buying and selling pressures in the medium term.
• 200 period simple moving averageIt is located at 1.2827. The price is a little high. less This level, which indicates long-term bearish momentum, still has some influence, but the recent uptrend challenges it. The slope is neutral Slightly down, indicating continued downward pressure.

Relative position of moving averages:

• the 20 period simple moving average He is above the 50 and 100 period simple moving averages But under 200 period simple moving averageindicating short term rising momentum within a wider range mixed direction.
• the 50 period simple moving average He is less the 100 and 200 period simple moving averagesconfirming that medium- and long-term trends remain in check. bearish pressure.
• the 100 period simple moving average He is less the 200 period simple moving averageindicating that the long-term downtrend is still in place, although recent price action is testing this trend.

Williams %R (14):

• Williams %RThe current reading is -36.99, which is in the middle range, neither overbought nor oversold.
• Recent fluctuations indicate that Frequency In the market.

🕵️ Key Notes

Price action:

Let’s analyze the recent price action of GBP/USD based on the chart:

1. sharp rise: In early and mid-July, there was a major bullish move, with the price rising from around 1.2650 to a peak near 1.3050. This represents a strong bullish phase.
2. Rejection at the peak: Upon reaching the high of 1.3050, there was a clear rejection, as indicated by the long upper wick on the candle above.
3. Corrective phaseAfter the peak, the price entered a corrective phase, characterized by a series of lower highs and lower lows. This correction led the price to drop to around 1.2650 by early August.
4. volatile fluctuationsDuring the corrective phase, there were several volatile swings, as the price fluctuated between support and resistance levels.
5. Double bottom formation: In early August, the price formed what appeared to be a double bottom around the 1.2650 level, indicating a potential reversal point.
6. Recent recovery: After the double bottom formation, there was a noticeable recovery. The price returned to rise above all major simple moving averages (SMAs).
7. Breakout above simple moving averages: The recent upward move saw the price decisively break above the 20, 50, 100 and 200 simple moving averages, indicating renewed bullish momentum.
8. Current unification: In recent days, the price appears to be consolidating above the 200 simple moving average, with small candles indicating some indecision.
9. Rejection of higher levels: The last candles are showing long upper wicks, indicating some rejection or resistance at higher levels around 1.2850.

Support and resistance levels:

• SupportsImmediate support is located at 1.2800 (20-period and 100-period simple moving average) and 1.2761 (50-period simple moving average).
• resistanceImmediate resistance is located at 1.2827 (200-period simple moving average) and 1.2850 (recent highs).

Moving averages:

• the 20 period simple moving average Currently working as Supports In the short term, while 200 period simple moving average Provides great importance resistance In the long run.
• The price is currently higher than All SMAsindicating a bullish bias in the short to medium term.

🤔 Possible trade scenarios

He is GBP/USD Buy or Sell?

The following trading scenarios are provided for educational purposes only. Since they do not include full risk management practices, they are not intended to serve as actual trading recommendations, but rather as food for thought to help you generate your own trading idea.

Long bias:

• Point of ConsiderationConsider entering a long position if the price finds support near 1.2800 (20-period and 100-period simple moving averages) or 1.2761 (50-period simple moving averages) and shows signs of a bounce, such as a bullish candlestick pattern or a reversal in the Williams %R indicator from neutral to oversold territory. Additionally, a break above the resistance level at 1.2850 indicates a potential continuation of the uptrend.
• Point of cancellationPlace a stop loss below the support level around 1.2700 to manage the risk.
• potential targetWe expect a move towards 1.2900 and above if the uptrend resumes.
• RationaleTargeting the 1.2900 level depends on the previous resistance level and psychological importance. If the price manages to break through the 1.2850 level, this indicates strong upward momentum and the possibility of further rise.

Short bias:

• Point of ConsiderationConsider entering a sell position if the price fails to hold the support level at 1.2800 (20-period and 100-period simple moving average) and shows signs of bearish momentum, such as a strong bearish candlestick pattern.
• Point of cancellationPlace a stop loss above the recent high at 1.2850 to manage risk. This level is crucial as a break above it would invalidate the bearish setup.
• potential targetThe initial target could be the support level at 1.2700. If the downward momentum continues, expect further decline towards 1.2650 or lower.
• RationaleTargeting the 1.2700 level initially is due to it being a psychological and historical support level. If the price breaks this level, it will indicate further bearish momentum and the possibility of a more significant decline towards the next support level at 1.2650.

📝 TAOTD Summary

• Current position: The price has been in an uptrend since early August, with higher highs and higher lows. Recently, the price has started to consolidate around the 1.2800 level, which coincides with the 20-period and 100-period simple moving averages, indicating a potential decision point.
• directionThe short-term trend appears to be bullish with prices above the 20, 50 and 100 period simple moving averages. However, the long-term trend remains under pressure with prices near the 200 period simple moving average.
• Main levelsSupport is at 1.2800 (20-period and 100-period simple moving average) and 1.2761 (50-period simple moving average), and resistance is at 1.2827 (200-period simple moving average) and 1.2850 (recent highs).
• batchThe Williams %R indicator indicates that the market is neutral, neither overbought nor oversold.

The artistic image is cautious. rising. 🐂

This market structure suggests that while the pair saw a significant correction from mid-July to early August, it is now showing signs of possible trend reversal.

This recent price action confirms this. After a strong bullish phase, a corrective move, and a potential double bottom pattern, the pair is now showing signs of restoration.

rest above All the simple moving averages and higher bottoms are bullish signals and provide a bullish bias. However, the resistance around 1.2850 and the consolidation phase suggest that the market is in critical point.

👀Keep an eye on…

Traders will likely be watching closely to see if this recovery can continue and break the recent highs, or if it will face further resistance and possibly reverse.

You have to be careful because the market structure is in transmissionand wait for clear breakouts or breakdowns to confirm the next important move.

The key levels to watch are: Modern rise Around 1.2850 level as resistance and A set of SMAs (especially the 20 SMA at 1.2800) as support.

A convincing break above 1.2850 could indicate that Continuation of the upward trendWhile a drop below the simple moving averages or a clear breakdown below 1.2750 would indicate that the recent bullish move was Correction in a larger downtrend.

When analyzing the markets, it is important to consider multiple factors besides technical analysis, including fundamental analysis, market sentiment, correlations between markets, and scheduled news events.