- GBP / USD is advancing for the third day in a row.
- The strong intraday bullish movement stalled near the 50% Fibonacci retracement.
- Mixed technical indicators warrant some caution.
GBP / USD attracted some buying after falling near the 1.3755 region and turned into positive territory for the day. It is now climbing for the third straight day on Monday. Momentum lifted the pair above the 200 hourly simple moving average to a four-day high during the first half of the European session.
The rises paused near the 1.3840 region, a resistance marked by the 50% Fib retracement of the recent 1.4002-1.3671 drop. The underlying bullish tone around the US dollar appeared to be the only factor limiting GBP / USD gains. The RSI (14) on the 1 hour chart has moved on the verge of entering overbought territory, suggesting some caution ahead.
Meanwhile, the technical indicators on the 4-hour chart have been gaining positive ground. That being said, the oscillators on the daytime chart have yet to confirm a bullish bias and require more caution before positioning for any further appreciation moves.
Therefore, it will be prudent to wait for strong continuation gains before confirming that the recent drop from the key 1.4000 zone has run its course. This will set the stage for an extension of the ongoing recovery from lows of several weeks.
The GBP / USD is trading around 1.2620, with the next relevant hurdle near the 1.3875 region (61.8% Fibonacci retracement). The pair could then break above the 1.3900 zone and test a dynamic resistance, which is the downtrend line, around the 1.3925-30 region.
On the other hand, the 1.3800 area (which coincides with the 38.2% Fibonacci level) now appears to protect the pair from further weakness. If GBP / USD falls below it could be vulnerable to accelerate the decline towards intraday lows around the 1.3755 area.
The latter is just ahead of a confluence region, comprising the 100 hourly moving average and the 23.6% Fibonacci retracement. If it continues lower, the pair could fall to 1.3700.
This is followed by multi-month lows, around the 1.3670 zone reached last week, which should yield decisively should pave the way for a further decline. The GBP / USD pair could then aim to challenge the support of the 100-day SMA, currently near the 1.3625 region.
GBP / USD 1 hour chart
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