FPM Technical Analysis : GBP/USD 28 February 2020

FPM Technical Analysis : GBPUSD (28 February 2020)

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high. So far this month, however, we’ve seen little but red, down 2.37%.

Daily timeframe:

Outlook brought forward from previous analysis –

Demand at 1.2823/1.2910, represents the lower edge of a multi-month range (supply at 1.3303/1.3184 caps overall upside), continues to contain downside, while a local trendline resistance (1.3514) hovers north of price. Supply mentioned above at 1.3303/1.3184 will likely enter the mix should we push above the said trendline, whereas beyond the current demand, another port of demand, a touch larger than the current, resides at 1.2649/1.2799 which happens to house the 200-day SMA.

Meanwhile, in terms of the RSI indicator, since the beginning of the year we have been compressing within a descending channel (black lines), with the value currently holding above channel support.

H4 timeframe:

Partially altered outlook from previous analysis –

Wednesday’s analysis noted that after price entered the jaws of an attractive supply drawn from 1.3023/1.3006, with an approach formed by way of an AB=CD pattern (orange) that terminated around 1.3013, further selling could be on the cards.

The analysis went on to further highlight:

It may also interest some traders to note that we likely have sellers attempting to fade the recent pullback from 1.2849, due to the 1.3070 double top formation recently confirming (breaking the 1.2872 low, the trough between the two peaks, marked with a blue arrow, offers double-top confirmation). The take-profit target (1.2672) for confirmed double-top patterns can be calculated by taking the distance between the highest peak and the trough and projecting this value south of the trough.

As can be seen from this morning’s chart, as expected, the H4 supply held ground, forcing a test at the demand area at 1.2868/1.2894. Yesterday’s action whipsawed the lower edge of the said demand and is, at the time of writing, modestly recovering.

H1 timeframe:

Sterling traded fairly resilient Thursday amidst broad-based USD selling. It was noted in Thursday’s analysis that the combination of daily demand at 1.2823/1.2910, along with H4 demand at 1.2868/1.2894 and the 1.29 handle on the H1 could encourage a recovery move, targeting 1.2957/1.2944 as an initial base.

As can be seen from the chart this morning, price did rebound from 1.29 and tested nearby demand-turned supply at 1.2957/1.2944, which aligned beautifully with the 100-period SMA and proved a supply of note. 1.29 gave way in early London, settling a few points north of 1.2850 before retesting the underside of 1.29 into closing trade.

Direction:

Shorter term, 1.29 could be a weak resistance due to the retest as resistance breaking to 1.2916 – enough to rupture buy stops above here and clear the pathway back to H1 demand-turned supply at 1.2957/1.2944. We’re unlikely to see this level break during Asia, though, it’ll likely be early London if it is to give way. In the event a move north of 1.29 materialises, intraday long positions could be considered.

Disclaimer: The information contained in this material is intended for general advice only.