TA of the Day: Is the GBP/USD Bull Run Sustainable? Watch these critical levels!

The GBP/USD it has risen strongly in the past two weeks, but its ascent has only slowed since last year’s high of 1.3143.

Although the pair has pulled back, the price action suggests very strong bullish sentiment in the GBP/USD pair.

However, this optimism may be short-lived, as a less harmonious (or even hawkish) tone from the side Fed Chairman Jerome Powell’s upcoming speech it could be the spark that ignites a sudden reversal!

Currency traders to hold their breath as JPow prepares to speak at Jackson Hole Economic Symposium Friday at 10 a.m. ET.

This highly anticipated event could be a turning point in shaping expectations for future interest rate cuts, ultimately influencing the trajectory of the US dollar!

The theme of this year’s symposium, “Reassessing the effectiveness and transmission of monetary policy”, which sounds extremely exciting. 😴

While no new interest rates or policies will be announced, Powell’s words will be scrutinized for clues about the Fed’s future plans.

later on friday Governor of the Bank of England, Andrew Bailey will also take the stage, but his speech may struggle to capture the limelight.

It’s like being the opening act after a superstar show. Watching Powell’s highly anticipated speech is like Ed Sheeran trying to wow the crowd after Taylor Swift has already blown them away.

As a result, Bailey’s message may not receive the same level of attention. 😢

With this potential event risk in mind, let’s see what the technicians are saying about GBP/USD.

Welcome to TA of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of GBP/USD based on the 4-hour chart:

📈 Technical Analysis of the GBP/USD 4-Hour Chart

Let’s analyze GBP/USD using key technical analysis concepts covered in our forex course.

Exponential Moving Averages (EMA):

• 10 period EMA: Positioned around 1.3077. The price is currently only above this level, indicating continued bullish short-term momentum. The up the slope confirms the strong recent buying pressure.
• EMA with 20 periods: Positioned around 1.3042. The price is good above this level, consolidating the ongoing short-term uptrend. The up The slope of the 20-period EMA suggests that the bullish momentum is sustained.
• 50 period EMA: Positioned around 1.2957. The price remains above this level, confirming the medium-term optimistic momentum. The up the slope indicates that the medium-term trend is still in favor of the bulls.
• 200 period EMA: Positioned around 1.2854. The price is significant above this level, highlighting strong long-term bullish momentum. The up the slope of the 200-period EMA suggests that the long-term trend remains intact.

Relative positioning of mobile media:

• The 10 period EMA is currently above 20, 50 and 200 period EMAs, indicating a bullish short-term trend in an overall bullish environment.
• The 20 period EMA is also above EMA with 50 and 200 periods, confirming bullish pressure continues in all time intervals.

Moving Average Convergence/Divergence (MACD):

• The MACD line is easy above signal line.
• Both lines are above zero.
• This suggests that while the bullish momentum is still present, it may be weakening slightly.
• The leveling of the histogram also indicates that the current uptrend may lose momentum.

🕵️ Key observations

Price action:

Let’s analyze the recent GBPUSD price action based on the chart:

1. Strong Uptrend: The most notable feature is the strong upward trend.
2. Low Major: The most recent significant low was formed in early August around the 1.2670 level. This serves as the starting point for current growth.
3. Initial growth: From the major low, there was a strong initial rally to around 1.2850 in mid-August.
4. Minor Retraction: Following the initial rally, there was a minor pullback to around 1.2750, forming a higher low compared to the lower low.
5. Second growth: The pair then turned higher again, surpassing the previous swing high and ending up around 1.2900.
6. Consolidation: A brief period of consolidation occurred around 1.2850-1.2900, forming a tight range.
7. Breakout and Major Growth: The most recent and significant fluctuation is the strong move up, breaking above 1.3000 and making a new swing high.
8. Uptrend growth: The uptrend angle became steeper with each swing, indicating bullish momentum.
9. Minimum Withdrawals: Pullbacks between rallies have been relatively shallow, especially in the most recent swing, indicating persistent buying pressure.
10. Swing length: The length of the up swings has increased, with the latest swing being the longest.
11. Sharp Rally: There has been a sharp, almost vertical rally in recent days, with the price moving from around 1.2700 to over 1.3000.
12. Breakout above resistance: The pair broke through significant resistance levels, including the psychological level of 1.3000 and the previous swing around 1.3050.
13. Trend acceleration: The uptrend has accelerated considerably over the past few candles, showing increased bullish momentum.
14. Recent High: The pair made a recent new high near 1.3130.
15. Current Withdrawal: The latest candle shows a slight pullback from the new high, potentially indicating some profit-taking or short-term consolidation.

Key Levels:

• 1.3000: Important psychological level, now acting as support.
• 1.3100: The following psychological resistance.

Support and resistance levels:

• Support: Immediate support is at 10-period EMA (1.3077) and 20-period EMA (1.3042).
• Resistance: Psychological resistance at 1.3100.

🤔 Potential commercial scenarios

Is GBP/USD a buy or a sell?

The following business scenarios are provided for educational purposes only. As they do not include complete risk management practices, they are not intended to serve as actual trading recommendations, but only food for thought to help you generate your own trading idea.

Long bias:

• Point of consideration: Consider entering a long position if the price finds support near the 10-period EMA at 1.3077 or a pullback to the 20-period EMA around 1.3042. A break above the 1.3100 level could also provide a buying opportunity.
• Invalidation point: Consider setting a stop-loss below the 20-period EMA at around 1.3030 to manage risk.
• Potential target: Look for a move to 1.3150 or higher if the uptrend continues.

Motivation: Strong bullish momentum supported by EMA structure suggests further upside potential. However, caution is advised given the approach to resistance and the slight weakening of the MACD momentum.

Short bias:

• Point of consideration: Consider entering a short position if the price shows signs of rejection around the 1.3100 resistance level or if there is a bearish crossover in the MACD.
• Invalidation point: Consider setting a stop-loss above recent high around 1.31200 to manage risk.
• Potential target: The initial target could be the 20-period EMA at 1.3042, with further downside potential towards the 50-period EMA at 1.29576.

Motivation: Slight weakening of MACD momentum and potential resistance at 1.3100 suggests a possible short-term pullback or consolidation. A rejection at 1.3100 could signal a short-term reversal.

📝 Summary of TAOTD

• Current position: The price is in a strong upward trend, testing the psychological resistance at 1.31000. Bullish momentum is supported by the position above all major EMAs, although the MACD suggests caution as momentum may be weakening.
• Trend: The overall trend is bullish, with price above the 200-period EMA, confirming long-term strength. Short- and medium-term trends are also optimistic.
• Recent levels: Short-term support at 1.3077 (10-period EMA) and 1.3042 (20-period EMA), with resistance at 1.31000.
• momentum: The MACD indicates bullish momentum underway, although it may weaken slightly, suggesting the possibility of a short-term pullback.

This market structure suggests that GBP/USD is in a strong optimistic phase.

The alignment of all technical factors (price action, moving averages, momentum indicators) supports this bullish view.

The price is above all major EMAs and the price itself has made a series of higher highs and lows.

The lack of significant pullbacks and the acceleration of the uptrend recently indicate this buyers are firmly in control. MACD confirms bullish momentum.

While the current trend is clearly bullish, abruptly of the recent move indicates that a pullback or consolidation could occur soon.

You should monitor how the price reacts to the psychological resistance level of 1.3100 above and the psychological support level of 1.3000 below.

Price recovery and holding 1.3100 could lead to further gains, while a break below 1.3000 could signal the start of a more significant correction.

🔑 The key will be if GBP/USD can maintain the pattern of higher lows in any pullbackand if possible break above the recent high to continue the uptrend.

Keep an eye out for potential volatility on the Jackson Hole news and watch for signs of exhaustion or potential reversal patterns given the magnitude of the recent rally.