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The British pound currency has started to test towards the 1.3500 level again as traders digest another big technical rejection above the 1.3600 level, creating another bearish lower high on the charts.
It is certainly the case the GBPUSD pair cannot make new higher highs on the larger time frame, and this is leading to traders to worry that sterling could start to resume its recent downtrend.
UOB Bank also share their concerns and note “Our view from yesterday where the ‘bias is on the downside’ for GBP was incorrect as it whipsawed between 1.3524 and 1.3643. The rapid pullback from the high of 1.3643 during NY session appears to have room to extend but a clear break of 1.3500 is unlikely.
The bank added “On the upside, a breach of 1.3605 (minor resistance is at 1.3580) would indicate that the current mild downward pressure has eased and since the start of the week, we have held the view that there is a slim chance for GBP to push higher to 1.3645.
UOB also that from here, GBP is likely trade between 1.3450 and 1.3650, and I tend to agree. Personally I think it is still smart to look to buy at the lower end of the range and sell at the highs until proven wrong.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are still slightly bullish towards sterling.
In reality, this is hard to determine, and not clear from the sentiment reading whether we see strength or weakness going from here on. It should be noted that 62% of traders expect further gains in the pair, despite sterling being sold on rallies, leaving room for further downside.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, technical analysis clearly shows that that bears are selling into every rally, as seen by the series of lower highs across the lower time frames charts.
This is very negative, and trader should be aware that the recent decline towards the 1.3470 price area is probably not the bottom. A breach of the 1.3330 level could set up much significant downside.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame, the GBPUSD pair has formed a huge descending broadening wedge pattern yet to play out to the upside. The overall nature of these patterns is usually bullish.
The GBPUSD pair is likely to gravitate towards the bottom of the pattern over the coming days and weeks if we see the yearly low broken. Trendline comes in around the 1.3200 area.
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