Trade witnessed an early bid dominate GBP/USD Monday, drawing price action north of 1.24 on the H4 timeframe. The pound, though, as you can see, was unable to sustain gains past 1.24, declining to 1.23 and holding as support amid early London hours. Defenceless, buyers eventually gave way and drove price to 1.2202, just ahead of a double-bottom support at 1.2200 and the round number at 1.22. The relative strength index continues to navigate its way through oversold terrain, but is showing modest signs of recovery.
Higher-timeframe movement on the weekly timeframe retested support-turned resistance at 1.2369. Support resides around 1.1904, a level that capped downside in early October 2016, which is sited just south of the 1.1958 September 2nd low. Daily price, however, is deriving support off a trend line resistance-turned support, extended from the high 1.2783.
While weekly price indicates further downside, daily and H4 action suggests a recovery. What’s also interesting on the H4 timeframe is the mild AB=CD bullish correction. As such, a close above 1.23 may be something to watch for today. Breakout buyers have approximately 70 points to play with north of 1.23 until shaking hands with weekly resistance at 1.2369. Therefore, tight entries could achieve reasonably attractive risk/reward.
Alternatively, driving through 1.22 may be on the horizon, unlocking the door towards 1.21 and then possibly Quasimodo support at 1.2014 on the daily timeframe.
Disclaimer: The information contained in this material is intended for general advice only.