Clings to gains below 1.3800, lacks continuation

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  • GBP / USD gains traction for the second day in a row on Tuesday.
  • A modest USD strength appears to limit the pair’s rally amid fresh Brexit jitters.
  • The bears need a sustained break below the support of the ascending channel.

GBP / USD gains traction for the second day in a row on Tuesday and rises to 1.3800 during the European session, although it lacks continuation. A modest strength in the US dollar limits any further gains for the pair amid new nervousness around Brexit.

From a technical perspective, the GBP / USD has been showing some resilience near the 200 hourly SMA. This is closely followed by the lower bound of an ascending channel extending from near the 1.3400 level, or September lows. The latter, currently around 1.3750, should now act as a key fundamental point for short-term investors. A compelling breakout below will set the stage for an extension of the recent rejection drop from the very important 200-day SMA.

GBP / USD 1 hour chart

The GBP / USD pair could then accelerate the corrective decline towards the test of the round 1.3700 level. The next relevant support is near the horizontal zone of 1.3675-70, which if decisively broken would make the pair vulnerable. Meanwhile, technical indicators on the daily chart, while losing positive traction, remain comfortably in bullish territory. This, in turn, warrants caution before opening aggressive bearish positions around the GBP / USD pair.

On the other hand, any significant positive movement beyond the 1.3800 level could continue to face stiff resistance near the 1.3830-35 confluence region. This comprises the 200-day SMA and a downtrend line extending from the end of July. Some continuation buying has the potential to further lift the GBP / USD pair towards the trending channel hurdle, currently around the 1.3885 region. A sustained force above that region will be seen as a new trigger for the bulls.

GBP / USD daily chart

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GBP / USD technical levels

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