GBP/USD: the long downward correction is expected

Current trend

The GBP is growing against the weakening USD, which is lowering against all the main currencies due to the negative fundamental background and loss of the investors’ interest. Yesterday the pair was traded in the narrow upward channel and reached the key resistance level 1.2615, which is the upper border of the wide downward channel. The GBP was supported by the strong Retail Sales and inflation data in the previous week. This week there were no key releases in the UK, so the pair was growing due to the negative Markit Services PMI from the USA, published in the previous week. Today the pair reversed into the consolidation due to the absence of the key macroeconomics releases. The Consumer Confidence and the FOMC Members’ speeches in the USA and the Mortgage Approval in the UK are worth traders’ attention now.

Support and resistance

The long upward wave can reverse into the downward correction to the key support levels of 1.2390, 1.2320 in the short term. The pair can lower to the level of 1.2615 or can grow to the levels of 1.2655, 1.2725 and form a downwards wave afterwards. The main catalyst for the lowering will be the fixing of the long positions of the GBP/USD pair, which will increase the demand on the USD. The indicators reflect the consolidation of the upwards trend: the MACD long positions volumes are kept high. The Bollinger Bands indicator reversed from the upward trend to the gentle moving, which reflects the possibility of the sideway consolidation which will be followed by the lowering of the pair. Despite the possibility of the reversal, the upward trend will develop due to the further lowering of the USD, so after the end of the correction the strong buy signal will be received.

Support levels: 1.2510, 1.2470, 1.2390, 1.2320, 1.2230, 1.2195, 1.2135, 1.2100.

Resistance levels 1.2570, 1.2615, 1.2655, 1.2725, 1.2800, 1.2870, 1.2910.

Trading scenario

Open short positions at the current level, taking the correction into consideration, with the target at 1.2390, 1.2320, stop loss is at 1.2740 in the middle term.

Increase the long positions with the target at 1.2710, 1.2775 form the key levels afterwards.

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