There has been a strong bullish rally in the GBP/USD pair after it hit the critical support level of 1.3049. From that level, the pair started its bullish rally and managed to break above the high of 4th December 2017. After the bullish breakout of the major resistance level, most professional traders went long and made a decent profit. Currently, the pair is testing the weekly resistance level of 1.38220, and a daily closing of the price above that level will confirm the establishment of a medium-term bullish trend in the GBP/USD pair.
GBPUSD daily chart analysis
Figure: GBPUSD pair surging higher after the breakout of trend line resistance
From the above figure, you can clearly see that the bulls are totally in control of the market. The pair found some solid support near the 100 days SMA and most of the aggressive traders went long with the bullish price action confirmation signal. The first attempt to break the trend line resistance failed and the bearish tried to take control of the market near the critical resistance level of 1.35268. However, the pair found extensive buying pressure near the minor support level of 1.33079 and surged through the bearish trend line. After the initial breakout, the pair gave a second chance for passionate traders to execute their long trades in minor bearish retracement. Currently, the pair is testing a critical resistance level of 1.38220. A daily closing of the price above that level is required to see a further bullish rally in the GBP/USD pair. If the bulls fail to clear that resistance level, we might see another retest of the broken trend line, which is now acting as a strong support zone.
GBPUSD weekly chart analysis
Figure: GBPUSD testing weekly resistance level at 1.38220
In the weekly chart above, you can clearly see that the market is ascending nicely by a series of higher peaks associated with higher lows. Most of the optimistic cable bulls in the Forex market are waiting for a clear of break of the critical resistance level of 1.38220 to execute fresh long orders in favor of the recent bullish trend. If the bulls retreat from this level, we will see a decent drop in the GBP/USD pair. The first initial bearish target for this pair would the weekly trend line support level of 1.34244. The expert traders will be looking for bullish price action confirmation signal at that level to execute long orders. However, if the bears manage to break this critical support level, the next stop for this pair would the dynamic support level of 1.31412 (100 weekly SMA). If this level fails to hold the price, we will see a strong bearish movement towards the major support level at 1.25747. This level is crucial for the long-term investors, since a clear break of this level will confirm the end of the medium-term bullish rally for this pair.
On the positive side, the bulls need to clear the critical resistance level of 1.38220 to aim for the next resistance level of 1.45372. If the bulls manage to take this pair near the 1.45372 resistance level, we might experience extensive selling pressure. Before we move further up, it’s highly probable we will experience ranging movements in the market.
The recent performance of the U.S dollar is not up to the market and most importantly FED chairperson Janet Yellen failed to come up with a clear fiscal policy for the year 2018. It is therefore obvious that we are not seeing any sudden surge from the dollar bulls which will push the cable deep down in the global market. However, if the Retail Sales m/m data for the British economy fails to beat the forecasted data, most of the bullish steam will evaporate. Considering all the parameters, it is better to wait on the sidelines and look for bullish price action signal near the weekly trend line support.