Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: GBP/USD Signaling Potential Upward Reversal

By Investing.com (Pinchas Cohen/Investing.com)ForexJan 19, 2022 09:23AM ET
www.investing.com/analysis/chart-of-the-day-gbpusd-signaling-potential-upward-reversal-200615229
Chart Of The Day: GBP/USD Signaling Potential Upward Reversal
By Investing.com (Pinchas Cohen/Investing.com)   |  Jan 19, 2022 09:23AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The UK's pound sterling is up about 0.3% Wednesday at time of writing, on dollar weakness. Today's rise trims Cable's 0.37% loss on Tuesday, the result of yesterday's USD strength.

During the previous three FX trading sessions—Friday through Tuesday—the pound was in decline, a mirror image of the dollar's simultaneous advance.

The GBP/USD pair's price has been dominated more by the state of the US economy rather than that of the UK. It has surprised us that the dollar has weakened since the Fed tilted more hawkish.

When the central bank starts on a path to reducing the available dollar supply and increasing interest rates, it's a no-brainer that demand for the greenback will accelerate. Of course, the opposite has been happening since the Fed surprised markets on Dec. 15 after revealing there were no longer any dovish policymakers left. After an intraday bump of 0.35% post-FOMC meeting, the dollar closed 0.06% lower on the day, the start of a slide that reached as much as 2% as of Friday. As well, since that mid-December day, the Dollar Index is still more than 1% lower.

Sterling experienced the opposite reaction. After dropping 0.5% during the session on Dec. 15, sterling closed 0.19% higher. The UK currency has gained as much as 3.87% since then until Thursday, but is still +3.05% since the Fed's surprising turn.

On the economic front, the British economy grew past pre-pandemic levels in November. The country's GDP expanded by 7% YoY, but that doesn't take into account the recent impact of Omicron, which is expected to disrupt that recovery.

What does that mean relative to the US economy? Unfortunately, that's murky. While Moody's sees the US economy as being stronger than Omicron, rising prices because of previous lockdowns may change that outlook. Moreover, China's economy could surpass that of the US by 2030, and Goldman Sachs forecasts the euro area economy could overtake America's in as little as two years.

In other words, anything could happen. All a trader can do is try keep up with the rapidly changing environment. Here's how that translates into the GBP/USD supply and demand equation on the technical chart.

GBP/USD Daily
GBP/USD Daily

Cable remains in a peak-and-trough downtrend. However, the first sign of a potential reversal appeared when the currency pair broke to the topside of its falling channel.

The 200 DMA blocked the price from extending the advance to post a peak higher than that of late October. However, the price found support above the 100 DMA and the top of the broken falling channel, which could be resting stops for bulls before tracking above 1.3840, which would be another potential sign in favor of an upward reversal.

Trading Strategies

Conservative traders should wait for the price to extend the downtrend by posting a low below the Dec. 8 trough and short, or establishing an ascending series of peaks and troughs and join the market in trading higher.

Moderate traders would risk a long position if the price closes at these elevated levels and retests yesterday's lows for a close entry.

Aggressive traders could enter a long position according to a plan that addresses their timing, budget, and risk aversion. Here is a basic example:

Trade Sample - Aggressive Long Position

  • Entry: 1.3630
  • Stop-Loss: 1.3580
  • Risk: 50 pips
  • Target: 1.3830
  • Reward: 200 pips
  • Risk-Reward Ratio: 1:4
Chart Of The Day: GBP/USD Signaling Potential Upward Reversal
 

Related Articles

Kenny Fisher
Japanese Yen Remains Directionless By Kenny Fisher - May 17, 2022

The Japanese yen has posted slight gains on Tuesday. In the North American session, USD/JPY is trading at 129.32, up 0.17% on the day. The US dollar pummeled the yen in the months...

Kenny Fisher
British Pound Soars On Strong Jobs Data By Kenny Fisher - May 17, 2022

The British pound continues to rally on Tuesday. GBP/USD is trading at 1.2463 in the European session, up 1.15% on the day. UK Employment Numbers Sparkle The tight UK labor market...

Chart Of The Day: GBP/USD Signaling Potential Upward Reversal

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Mohd Izhar Muslim
Mohd Izhar Muslim Jan 19, 2022 11:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you for the article 👍
Carl Tom
Carl Tom Jan 19, 2022 11:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
fish get caught
Hopium Dealer
HopiumDealer Jan 19, 2022 8:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
USD demand is highly impacted by global trade flow of funds as it is the largest currency used in cross border transaction. That USD is weakening while the FED is making moves that should strengthen it is a potential canary. We might be entering a soft patch or possible recession of the making if stuff.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email