Bulls take a breather near multi-year highs

• GBP / USD was seen to consolidate its recent strong gains to 34-month highs.
• The setup favors bullish traders and supports prospects for higher profits.
• A break below the 1.3755-60 region is needed to negate the positive bias.

The pair GBP/USD It consolidated its recent strong gains to the highest level since April 2018 and was seen swinging in a range above the 1.3900 mark during the mid-European session. The slightly overbought RSI on the short-term charts appeared to be the only factor preventing the bulls from making new bets and limiting the upside for the pair.

Meanwhile, the price action within the range constitutes the formation of a rectangle on the 1-hour chart. A rectangle is generally thought of as a continuation pattern that marks a brief pause in the trend, bullish in this case. This, along with the appearance of some falling buying on Friday, supports the prospects for an extension of the upward trajectory.

The bullish outlook is bolstered by the prevailing selling bias around the US dollar, which remains depressed due to underlying bullish sentiment in financial markets. Therefore, a further move towards intermediate resistance at 1.3960, en route to the key psychological mark of 1.4000, now seems like a clear possibility.

On the other hand, weakness below the lower bound of the triangle, around the 1.3880 region, could accelerate the decline towards horizontal support near 1.3850. Any subsequent decline could still be seen as a buying opportunity near 1.3800. This, in turn, should help limit the decline near the 1.3760-55 resistance breakout point.

A convincing break below the latter could negate the positive outlook and indicate that the GBP / USD has peaked in the near term, which should trigger an aggressive long-running trade.

4 hour chart

Technical Levels