The pound resumed its gains against the dollar in October as the greenback generally sold off. The ‘base case’ of a win by Joe Biden in the American presidential election was priced in over the course of the last two months, with the likelihood of more fiscal and monetary easing negative for the dollar. Meanwhile in the UK expectations that the government might secure some sort of trade deal with the EU have been on the rise This technical analysis of GBPUSD considers the daily chart; many thanks to EdiSon Miranda Monzón for requesting this symbol!
High resistance here is the high from early September around $1.34. This appears to be a strong area from which a downward retracement might be expected if it’s tested over the next few weeks. Low support on this chart is around $1.23, although the latest swing low from late September at about $1.27 will probably be more important in the near future.
Technical indicators on GBPUSD H4
Moving averages give a buy signal overall with price above all three of the 50, 100 and 200 SMAs. However, the 50 SMA completed a death cross of the 100 at the very end of October. The value area between this and around the key psychological zone near $1.30 is the main point of focus as support from moving averages for now.
Price has now moved out of overbought based on both Bollinger Bands (50, 0, 2) and the slow stochastic (15, 5, 5) although the latter at about 78 is very close to the trigger zone for buying saturation. Bands have started to expand again slightly in November so far, so one might expect somewhat higher volatility over the next few weeks. Selling volume over the last few days has been significantly higher than the average over the last few months.
Price action and Fibonacci
There hasn’t been any clear fundamental movement on this chart since late July when there were no fewer than 12 consecutive days of gains. A number of fairly large up candles since September would suggest eagerness to resume the uptrend, and we can also see higher momentum since the American elections.
The weekly Fibonacci fan on this chart provides both a support from the 61.8% area and a possible resistance from the 50%. Both have matched the latest medium-term uptrend quite closely, so continuation within this upward channel might be possible over the next few weeks.
Trade talks: the latest
While stressing that nobody really has a good idea of what the final outcome of the British-EU trade talks will be, sentiment has generally improved in this area over the last few weeks. Next week’s EU summit is meant to be the deadline for agreement; progress remains uncertain. The British government has hailed the ‘final stage’ but gaps clearly remain in ‘hot’ areas like fishing rights.
The possibility of political instability in the UK is higher next week given the resignation last night of Dominic Cummings, the prime minister’s chief advisor. Another senior advisor, Lee Cain, also resigned earlier.
Technical analysis of GBPUSD: summary
The technical picture for cable is overall quite positive at the time of writing. Continuation upward and possibly a retest of August-September’s highs seem to be possible unless there’s a sudden change in the tone of fundamentals next week. Next week’s key data include American retail sales and British annual inflation: for more information, please join us again for Monday’s preview of weekly forex data.
Thank you for reading Exness Education’s technical analysis of cable! We’d particularly like to thank EdiSon Miranda Monzón for requesting this article on Facebook. You can also request any symbol you wish to read about simply by commenting below one of Exness’ analytical posts on Facebook.