Technical outlook: GBPUSD

Summary:

• GBPUSD rebounds off the key support zone from the W1 Interval
• Main trend remains downward 
• Boris Johnson to meet with G7 leaders this weekend

The GBPUSD rebounds off the key support zone

Let's start the analysis with a weekly interval. Looking at the W1 chart, the price has a problem with breaking below the 1.2080 handle. The support zone is marked lows from the 2016 and 2017. The last W1 candle was a bullish one and the bullish engulfing pattern was painted in turn. However, the beginning of the week was mixed with lack of bulls in sight. Close of this week’s candlestick should determine whether the aforementioned buy signal remains valid or not. Higher weekly close would confirm the signal while the lower one would invalidate it.  Note that the main trend has been downward for a long time. Stop loss orders may be stacked below the green zone therefore a break lower could trigger them and lead to a deeper decline. In such a scenario, one may expect a movement in the direction of 1.1800 handle, where the 161.8% external retracement can be found. 

Source: xStation5

Lower limit of overbalance structure halts decline on D1 interval

Moving onto a lower time frame - D1, the Overbalance structure has to be taken into account. The second correction in the whole downward impulse was slightly bigger than the previous one, but the 127.2% factor was not broken, so the structure remained valid. If a bigger upward correction occurs, the resistance resulting from the aforementioned 1:1 structure - 1.2280 should be of the first interest for traders. The next important resistance can be found at 1.2400 handle.

Source: xStation5

Neckline of the inverse head and shoulders pattern in the spotlight

An inverse head and shoulders pattern can be spotted on the H1 interval. GBPUSD had a problem with breaking above the resistance zone at 1.2170 handle yesterday. However, a “buy” signal was not generated as the price failed to break above the neckline. The pair spiked yesterday after the comments of the German Chancellor, who said that she would think about practical solutions to the Irish border impasse. While such a statement is nothing new, the pound managed to move almost 100 pips higher yesterday. Pound could use more positive comments on the Brexit, especially relating to an agreement between the UK and the EU. Boris Johnson, the UK Prime Minister, has launched a journey across Europe during which he will meet with various leaders. The journey will be concluded with the G7 meeting this weekend.

Source: xStation5