GBPUSD tiptoed to the downside after its two-week rally peaked at a seven-week high of 1.3549 on Friday, with the price falling as low as 1.3429 on the first trading day of 2022.
The pair is currently oscillating between gains and losses, creating doubts about whether it could stage a breakout above the upper boundary of the bearish channel, last tested back in October.
Both the RSI and the Stochastics are endorsing the negative momentum in the price as the indicators drift southwards. That said, the positive slope in the red Tenkan-sen line, and the fact that the MACD is some distance above its zero and signal lines keep feeding some optimism that selling pressures may not last for long.
If the bulls manage to set a foothold at the bottom of the Ichimoku cloud at 1.3465, which has been balancing bearish movements the past two days, they may attempt to crawl up to the 23.6% Fibonacci retracement of the long-term uptrend from 1.1409 to 1.4248 at 1.3578, and then touch the channel’s upper boundary seen around 1.3600. A significant move above this ceiling would put the seven-month-old downward pattern into question, likely bringing the 200-day simple moving average (SMA) at 1.3740 immediately into scope in the aftermath. Moving higher, a decisive close above October’s resistance of 1.3835 will be needed to officially dissolve the negative trend in the market.
In the event the bears keep the lead, the 50-day SMA at 1.3400 could block the way towards the 1.3300-1.3355 support area. Failure to hold above the latter could see an extension towards the crucial 1.3200 – 1.3160 zone, while a steeper decline is expected to rechallenge the channel’s bottom line around 1.3100.
Summarizing, despite the latest pullback, GBPUSD has yet to confirm a bearish bias. A rebound at 1.3465 could shift the focus back to the upside. Yet, for an outlook improvement in the broad picture, the bulls will need to rally above the downward-sloping channel.
