What is the next catalyst?
The GBPUSD action in most of the NY session has been characterized by up and down activity. The high has been able to stay topside resistance outlined in an earlier post at the 1.5389 level (the high extended to 1.5385). The low has stalled just above the next support targets against the 100 hour moving average and 50% retracement of the move up from the April 27 low (see hourly chart below). The path has been bumpy with ups and downs but the destination against what is key support has been reached.
That support should be the catalyst for the activity going forward. With the 100 hour MA, the 50% and interest from the 1.5300 natural level converged, it becomes a level to level to lean against as support. So far the market has done just that. That is good news for the buyers and gives a low risk buying opportunity
The bad news - or news that might indicate a correction lower is the path of least resistance - is the pair prior to today - was up 12 of 13 trading days. That move higher the price up 928 pips. That is a pretty big move for 13 trading days. Today is the 2nd down day (so 12 of 14 are up). So there is room for a correction. The 100 day MA comes in at 1.5170. The 38.2% of the 928 pip move is at 1.5142.
What would be a catalyst for a move lower toward those levels technically speaking?
- A break below the 1.5300 level. With the 100 hour MA and the 50%, that makes sense.
- A rally that holds below the broken trend line on 4-hour chart (currently at 1.5370).
Currently, the price is between the extremes. So be patient. Support was not tested on the last leg down. Look for a correction to see if resistance above can keep a lid on it.
