- GBP/USD rose on the last day of the week, although the rally lacked bullish conviction.
- Recent range-bound price action points to indecision about the next leg of a directional move.
- The bulls need to conquer the 1.2500 level before positioning themselves for an extension of the recent rally.
The pair GBP/USD attracted some buying on the dips on Friday, although it failed to take advantage of the move and held below the key psychological 1.2500 level during the early American session.
Better-than-expected macro data out of the UK proved to be a key factor providing a modest lift to sterling, although stagflation fears and Brexit woes acted as a headwind. Aside from this, a nice pickup in US dollar demand prevented a significant rise in the GBP/USD pair.
Generally speaking, spot prices have oscillated in a wider trading range that has held for the last four sessions. This points to indecision on the next leg of a directional move for GBP/USD and warrants caution amid mixed technical indicators on the hourly/daily charts.
The oscillators on the hourly charts remain in positive territory, but have yet to confirm a bullish bias on the daily chart. Furthermore, the GBP/USD pair has so far struggled to find acceptance above 1.2500, which coincides with the 38.2% Fibonacci retracement level of the 1.3090-1.2156 decline.
Therefore, it is prudent to wait for a strong buying follow-up beyond the aforementioned barrier before making aggressive bullish bets. GBP/USD could then rally to the 1.2570-1.2575 region heading towards the 1.2600 round figure and the 50% Fibonacci level around the 1.2630-1.2635 area.
On the other hand, the daily swing low around the 1.2440-1.2435 area should now protect the immediate low ahead of 1.2400. Next, there is support near the 1.2380-1.2375 area, or the 23.6% Fibonacci level, which if broken will change the bias in favor of bearish traders.
The next relevant support is set near the bottom of a multi-day trading range around the 1.2330 region. A convincing break of the latter would make the GBP/USD pair vulnerable to weaken further below the 1.2300 level, to test the 1.2270-1.2260 support zone.
4 hour chart
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Technical levels
Source: Fx Street
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