On the daily chart below for GBPUSD, we can see that the market is struggling to maintain the bullish momentum every time it breaks the top of the range. The latest breach failed as US retail sales missed expectations across the board and pushed the market lower on fears of an earlier-than-expected recession.
Although buyers went into the long moving average in the red and started charging higher as US PMIs came in much better than expected and recession fears were pushed away. If the buyers fail again here, we could see another sell-off with the moving averages crossing lower and this time the sellers may be in full control.
On the 4 hours chart below, we can see that the price has recently breached the ascending channel. The price is diverging with the MACD for the entire upward move from the 1.20 handle. When there is divergence, the price generally pulls back or reverses completely.
Here, the price has remained in line to the upside with significant pullbacks along the way, but breaking out of the channel is a bad omen. The last line of defense for the buyers will be the support level at 1.2344. If that level is broken, then the sellers could really push the price down to the 1.20 handle.
On the hourly chart below, we can see that the price has now pulled back to the trend line where it converged with the 38.2% Fibonacci retracement level and the red long-term moving average. This is a strong support area and buyers are likely to rely on it to resume the bullish trend. In the event that the price breaks below the trend line, the sellers are likely to regain control and push the price first to support 1.2444, and upon further breakout, to level 1.2344.
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