TA of the Day: Is the Uptrend in GBP/USD Over?

sterling The pound has reached its highest level against the US dollar in about two and a half years, and is also performing well against the euro.

The rise in the pound is largely driven by speculative bets on interest rates based on expectations that the Bank of England will maintain higher interest rates for longer than the Federal Reserve and the European Central Bank.

But this makes sterling vulnerable to shifts in monetary policy expectations, and this rally could quickly unravel in markets still unsettled by the turmoil of early August.

Moreover, the pound is receiving support from economic difficulties in the eurozone and emerging challenges in the United States, along with the Bank of England’s reluctance to fully commit to cutting interest rates.

Although the GBP/USD pair has made significant gains, analysts warn that the currency is at risk of significant volatility due to continued speculative bets on interest rates and upcoming events such as UK Chancellor Reeves’ first budget in late October and the US elections in November.

The fundamentals look cautiously bullish, but what about the technical outlook for GBP/USD?

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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

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

Simple Moving Averages (SMAs):

• 20 period simple moving averageIt is placed around the level of 1.3206. The price is: close This level, indicating a short-term consolidation. To the top The slope indicates that the overall short-term trend remains upward.
• 50 period simple moving averageIt is located at the level of 1.3133. The current price is above This level indicates the continuation of the bullish momentum in the medium term. To the top The slope indicates continued buying pressure.
• 200 period simple moving averageLocated at 1.2920. The price is good. above This level indicates strong long-term bullish momentum. To the top The slope confirms that the long-term trend is still intact.

Relative position of moving averages:

• The 20-period simple moving average is above The 50 and 200 period simple moving averages indicate a strong short-term uptrend within a broader bullish context.
• The 50-period simple moving average is also above The 200-period simple moving average is consolidating the medium-term uptrend.
• This alignment of moving averages indicates that overall momentum is strongly in favor of bulls across multiple time frames.

Equivalent radar rate:

• Equivalent SAR points are set. above Current price, indicating a possible reversal or correction in the near term.
• The current situation suggests that the bullish momentum may be weakening, leading to a potential pullback.

random:

• The Stochastic indicator is currently in the oversold zone, with the %K line at 22.56 and the %D line at 19.93.
• This suggests that the pair may be nearing the end of the downward correction and may be on the verge of an upward reversal soon.
• But it is important to wait for confirmation before acting on this signal.

🕵️ Key Notes

Price action:

Let’s analyze the GBP/USD price action from the beginning of the chart:

1. Initial stage (early August):
   • The chart starts with the price around 1.2850.
   • There is initial volatility with prices swinging between around 1.2750 and 1.2850.
   • This period shows a slight downward trend with lower highs and lower lows.
2. Bottom Formation (about August 10-11):
   • The price reaches a low at 1.2700-1.2720.
   • This represents the end of the initial bearish phase and the beginning of the reversal.
3. Sharp reversal (mid-August):
   • From the low point, there is a rapid and exciting upward movement.
   • The price is breaking the previous resistance levels with strong momentum.
   • This movement is characterized by long green (bullish) Japanese candlesticks, indicating strong buying pressure.
4. Steady Uptrend (Mid to Late August):
   • After the initial sharp rise, the price continues to rise in a more conservative manner.
   • An uptrend forms a clear pattern of higher highs and higher lows.
   • Each pullback is usually shallow and is quickly followed by further upward movement.
   • The price remains above the bullish 20-period simple moving average during this phase.
5. Acceleration (late August):
   • As August ends, the upward trend accelerates.
   • There is another series of strong bullish candles pushing the price to new highs.
   • The pair reaches its top at 1.3270-1.3280.
6. Recent decline and (current) consolidation:
   • After reaching the high, there is a pullback.
   • The price declines from the peak, forming several red (bearish) candles.
   • This pullback is deeper than previous pullbacks in the uptrend.
   • The recent candles are indicating some consolidation around the 1.3170-1.3180 level.
   • Recent price action indicates a potential pause in the uptrend or a possible correction.

Evolution of market structure:

Let’s describe how the market structure has evolved over time:

1. Initial bearish structure (early August):
   • The chart starts with a bearish structure.
   • The price records lower highs and lows.
   • The price is below the visible moving averages, indicating a downtrend.
2. Operation Bottom (August 6-8):
   • Downward momentum is slowing down.
   • The price starts to consolidate around the lows.
   • This represents a potential change in market structure, indicating a possible end to the downtrend.
3. Bullish Reversal (Mid-August):
   • A sharp reversal occurs, dramatically changing the market structure.
   • The price breaks recent resistance levels and short-term moving averages.
   • This indicates a higher high and a higher low, indicating a potential change in trend.
4. Establishing a bullish structure (mid to late August):
   • The pair starts making higher highs and higher lows consistently.
   • The price remains above the 20-period simple moving average, which is now acting as dynamic support.
   • The moving averages have started to converge in a bullish manner (short term above long term).
   • An ascending channel has started to form, providing a clear structure for the uptrend.
5. Strengthening the bullish structure (late August):
   • The uptrend is accelerating, with the price moving more sharply upward.
   • The gap between the price and the longer-term moving averages (50 and 200 SMA) is widening.
   • The ascending channel becomes more defined.
   • Pullbacks are becoming shallower, indicating strong bullish sentiment.
6. Peak and initial decline (end of August):
   • The price reaches a new high, marking the peak of the current bullish structure.
   • The pullback begins, and it is deeper than previous corrections in the uptrend.
   • This represents the first major challenge to the established bullish structure.
7. Unification stage (current):
   • The price enters a consolidation phase after a pullback.
   • The market structure is now less clear.
   • The bullish structure is being challenged but not broken yet.

Support and resistance levels:

• Instant support: Around 1.3170 (current price level and 20 SMA)
• Upcoming support: 1.3130 (50 simple moving average)
• Strong support: 1.2920 (200 simple moving average)
• Immediate resistance: Previous high around 1.3260 and psychological level 1.3200.

Key turning points:

• Low swing: Early August around 1.2665.
• swing high: Late August around 1.3260.

Possible chart patterns:

• The recent price action may form a bullish flag pattern, where the flag column represents the sharp rise and the flag represents the current consolidation.
• This is usually the trend. continuation pattern.

🤔 Possible trade scenarios

He is GBP/USD Buy or Sell?

Long bias:

• Point of ConsiderationConsider entering a buy position if the price finds support near the 20-period simple moving average at 1.32060 and shows signs of a bullish reversal, such as a Stochastic crossover or a Parabolic SAR reversal below the price.
• Point of cancellationConsider setting a stop loss below the 50 period simple moving average at around 1.31300 to manage risk.
• potential targetWe expect the price to return to the recent high at 1.31890 or higher if the uptrend resumes.

RationaleThe overall trend is up, and the oversold Stochastic indicates a possible bullish reversal. The key is to wait for confirmation from price action and indicators such as the Parabolic SAR.

Short bias:

• Entry pointConsider entering a sell position if the price fails to stay above the 20-period simple moving average and the Parabolic SAR indicator remains above the price, indicating continued downward pressure.
• Stop lossA stop loss should be placed above the recent high at around 1.32100 to manage the risk.
• goalThe initial target could be the 50-period simple moving average at 1.31336, with further downside potential towards the 200-period simple moving average at 1.29204.

RationaleParabolic SAR above the price and the possibility of further declines indicated by the consolidation indicates a possible correction in the short term. Stochastic oversold requires caution as a reversal may occur.

📝 TAOTD Summary

• Current positionThe price is in a strong uptrend but is currently consolidating around the 1.3160 ​​level. The Parabolic SAR indicator is indicating potential bearish pressures, while the oversold Stochastic indicator is signaling a potential bullish reversal.
• directionThe overall trend is up, with the price above the 200-period simple moving average, confirming long-term strength. The short-term trend is strengthening, with a possible uptrend continuation or short-term correction.
• Main levelsSupport is at 1.3130 (50-period simple moving average), with resistance at the psychological level of 1.32000 (20-period simple moving average).
• batchThe Stochastic indicator indicates oversold conditions, while the Parabolic SAR indicator indicates potential short-term bearish momentum.

In general, the price action shows a clear transition from a downtrend to a strong uptrend, followed by a recent pullback.

The movement was largely directional, with the uptrend being particularly strong and persistent.

The recent pullback can be seen as a normal correction within an uptrend or perhaps the beginning of a more significant reversal, depending on How price behaves around current levels and major moving averages.

The stochastic oversold condition and potential bullish flag pattern suggest that the uptrend may resume soon, but the bearish signal from the Parabolic SAR indicator suggests that to caution In the very short term.

While the current structure is bullish, it is now at a stage that could determine whether the bullish structure will continue or if a more significant correction or reversal awaits us.

the Main levels In order to monitor the maintenance of the ascending structure, there are: recent swing lows And the 50 period simple moving average.

A separation A decline below these levels may indicate a change in the market structure in the medium term.