Broad-based dollar upside, along with a rebound in US Treasury yields and uncertainty surrounding the UK’s budget, weighed on sterling Wednesday. Despite dipping a toe in waters north of the key figure 1.30, the H4 candles, leaving trend line resistance, taken from the high 1.3284, unchallenged, fell close to 100 points. December’s opening level at 1.2908 entered view, located a few points ahead of the 1.29 handle. The relative strength index (RSI) reports values beneath 50.0, with the possibility of a run to oversold territory forming.
Weekly price is seen languishing beneath long-standing trend line resistance, pencilled in from the high 1.5930, though demand around the 1.2939 region is also still in motion (black arrow). Continued downside may imply a break of the said demand, tripping sell stops and testing the 2019 yearly opening level at 1.2739. A break higher, on the other hand, could see the 2018 yearly opening level enter the fight at 1.3503.
From the daily timeframe, we can see price turned lower a touch below trend line resistance, taken from the high 1.3514. Further downside from here has support fixed at 1.2769, a 127.2% Fibonacci extension at 1.2738 and the 200-day SMA. Note the said SMA has been flattening since mid-October 2019.
Traders who read Wednesday’s report may recall the following:
Although H4 price invites a possible approach to 1.31, chart studies indicate some reasonably heavyweight resistances before we connect with the said round number: weekly and daily trend line resistances. So, while a break above 1.30 is considered a bullish indication, trade with caution as higher-timeframe sellers may lie in wait. With this being the case, and assuming selling does indeed take over, a H4 close beneath 1.30 could reopen the door for bearish scenarios back to at least the 1.29 region. A retest at the underside of 1.30 would be particularly attractive for sellers, especially if formed by way of a H4 bearish candlestick signal, a shooting star pattern, for example.
Those who sold the break back beneath 1.30 ended Wednesday in healthy profits. A retest to the underside of 1.30 did not materialise unfortunately, seen clearer on the H1 timeframe.
The 1.29 region could prompt a recovery today, yet further selling could also be in store through 1.29 to the 1.2849 February 20th low and H4 support at 1.2824. As such, a H4 close below 1.29 may reopen the door to additional bearish themes.
Disclaimer: The information contained in this material is intended for general advice only.