GBP/USD Approaching An Important Level
Skerdian Meta • 2 min read
A couple of days ago we took a look at GBP/USD since we were approaching an interesting level at that time. But the Brexit events keep coming, which keep pushing this forex pair around breaking old support and resistance levels while threatening new ones.
One of these events and probably the most important one in a few months time span, the UK Supreme Court ruling yesterday to send Brexit to the Parliament before triggering Article 50 sent GBP/USD like knife throw butter.
The level I was watching was 1.250-25, which was where the 20 SMA was standing on the weekly forex chart and the 100 SMA on the daily GBP/USD chart, as you can see in the image below. We could have opened a long term sell forex signal right there, but the market sentiment towards the GBP is very positive right now, while the opposite is true for the Buck.
The 20 SMA has been broken and might turn into support now
My logic tells me that this is a lose/lose scenario because it will either delay Brexit and add to the uncertainty which businesses loathe or carry on with it as it was. Yet, the market is seeing this as a positive thing because it might reverse Brexit on the parliamentary vote, which I´m 100% sure will never happen, unless they want to commit political suicide.
So, that happened and the resistance level we were watching got smoked. As you can see the 100 SMA in green has been broken and it might provide some form of resistance now, but the downside is another story.
Right now we are interested in the upside only, since we´re looking for a spot to sell. Well, we´re in luck, a long term support turned resistance is far from here.
In summer last year, the Brexit jitters sent this pair tumbling, but the 1.28 level (give or take 10-20 pips on either side) provided solid support. It was obvious that it wouldn´t survive the panic and it didn´t for too long, so that level turned into resistance now.
We´re looking at it again now. The price is still about 200 pips short but we might get there as early as London session tomorrow morning. I will also check the price action when we get there to see the upward momentum and if really are sellers waiting to jump over, but I´d love it if the price marched up there slow enough to not test it before the week closed.
This way the stochastic indicator on the weekly chart will get near the overbought area. That would give GBP/USD bears another strong reason to pull the trigger. Let´s hope it goes like that.