Corrects past the 61.8% of the move higher last week
The GBPUSD has gotten off to a weak start as EUs Barnier and UK PM Johnson start the trade deal process with each planting their flags. Those flags are not exactly close (see Justin's post here).
Looking at the hourly chart above, the price fall gapped a little lower at the opening, fell below the high prices from January 21, January 23, in January 24. Accelerated through the 38.2% retracement at 1.3119 and then the 50% retracement at 1.30914. The tumble reached the cluster of hourly and 4 hour moving averages between 1.30805 and 1.30548 and the 61.8% retracement of the move up last week at 1.30638.
The price has been consolidating over the last 3 – 4 hours near the lowest moving average at 1.30548, but stays below the 100 hour moving average 1.30686. For the buyers from last week, the tumble today seem to of forced some of them out of those positions.
The sellers – looking for continued retracement of the move higher last week – can use the cluster of moving averages with the highest at 1.30805 as a risk defining level. Going back above the 50% at 1.30914 would also muddy the waters even more for traders today.
On the downside, the 1.3026 area was a ceiling from the end the Tuesday to midday on Thursday. A move toward that level should find support. A break below will have traders thrown in the towel and looking toward completing "the lap" to the downside (lows at 1.2974 and 1.29769 from Tuesday and Thursday).
Overall the movement today is 137 pips. The average over the last 22 days is 92 pips. So traders could argue the pair has done enough for now.
However, the move seen today, had fundamental worries and fear to justify the price action. The buyers from last week are certainly feeling like they were suckered in and are feeling the pain from the sellers taking back most of the technical control in the intermediate-term.
