Wed, Feb 01, 2023 @ 05:25 GMT
HomeContributorsTechnical AnalysisGBP/USD: Cable Keeps Positive Tone Above 200DMA But Weekly Doji Warns

GBP/USD: Cable Keeps Positive Tone Above 200DMA But Weekly Doji Warns

Cable remains constructive and extends bounce from 200DMA on Friday, retracing over 61.8% of a shallow pullback from 1.2344 to 1.2106 so far.

Bulls are underpinned by 10/200DMA golden-cross and strong positive momentum on daily chart, eyeing a multi-month high at 1.2344 (Dec 5), break of which would signal continuation larger uptrend from 1.0348 (2022 low, posted on Sep 26).

However, traders remain cautious as initial warning signals come from weekly chart, where Doji candle is signaling indecision, after four straight weeks of rally.

Strongly overbought stochastic on weekly chart, stretched 14-period momentum and RSI turning south, add to signals that bulls might be running out of steam.

Broken 200DMA (1.2119) reverted to solid support and keep bulls intact while the price action holds above, while firm break here would signal that near-term structure is weakening, though stronger negative signals could be expected on drop below 20 DMA (1.2036) and psychological 1.20 support.

The near-term action may stay in a quiet mode until next week’s key events (UK Nov inflation on Wednesday and BoE rate decision on Thursday) which are expected to give clearer signals of pound’s near-term direction.

Inflation in UK is expected to slightly ease in November after hitting a multi-decade high last month, though economists expect inflation to remain elevated for some time and likely to become entrenched that would make BoE’s attempts to put inflation under control, much more difficult.

The Bank of England is expected to raise interest rates by 50 basis points to 3.5% on Thursday.

Res: 1.2293; 1.2344; 1.2406; 1.2450.
Sup: 1.2200; 1.2151; 1.2119; 1.2036.

Windsor Brokers Ltd
Windsor Brokers Ltd
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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