Sterling exploited broad dollar weakness Thursday, adding more than 60 points. Early London observed H4 overthrow 1.29 to the upside, as well as December’s opening level at 1.2908, swiftly followed by a retest going into US trading. Local trend line resistance, taken from the high 1.3069, is next on tap, with a break exposing the widely watched 1.30 figure. While Quasimodo resistance at 1.2981 is visible (black arrow), mentioned H4 structure is likely to take pole position. With respect to the relative strength index, we’re fast approaching overbought status and currently producing hidden bearish divergence.
The story on the bigger picture has weekly price interacting with the 2019 yearly opening level at 1.2739, off YTD lows. A breach of the said support may side-line hopes of recovery and shine the spotlight on support from 1.2369, though the likelihood of the unit now reaching long-term trend line resistance, etched from 1.5930, is a strong possibility.
In conjunction with the weekly timeframe, we can see price action on the daily timeframe poised to shake hands with trend line resistance, extended from the high 1.3514. This follows a stronger-than-expected recovery off support at 1.2769 and a 127.2% Fibonacci extension at 1.2738, closely shadowed by the 200-day SMA. Note the said SMA has been flattening since mid-October 2019.
Each timeframe analysed exhibits scope to explore higher ground. A second retest at 1.29 will, therefore, likely be of interest to many traders, if noted upside targets have yet to enter the mix.
Conservative traders off 1.29 may opt to wait for additional confirmation to form before pulling the trigger, given round numbers being prone to whipsaws.
Disclaimer: The information contained in this material is intended for general advice only.