Technical Analysis

GBP/USD holds higher on softer dollar but gains aren’t all that meaningful

It was looking good for GBP/USD buyers until we got a dose of reality check last week amid a more hawkish Fed and dovish BOE. The attempted upside breakout above the August highs was quickly dealt a blow and right now, we’re sort of testing the appetite of both buyers and sellers heading into the turn of the year.

The heavy drop back below the August highs at 1.2276-93 saw sellers regain back some control, with the inability to break above the 50.0 Fib retracement level of the swing lower since last year – seen at 1.2306 – also being a key impediment for buyers – at least on the weekly chart.

The recent retreat though is holding just above the 200-day moving average (blue line) and that is the line in the sand for sellers to really make a play for a downside move. That is seen at 1.2093 currently, so it will require a drop back below that to really get things flowing for a push back towards 1.2000 next.

For now, the dollar is softer across the board as markets take a bit of a breather after the events late last week. Equities are slightly higher, finding a bit of respite but it doesn’t take away from the brutal selling that took place since Wednesday.

As for buyers, the same key levels above still apply if they are to try and make for another attempt at an upside break. The confluence of the 100 and 200-hour moving averages will also provide some near-term resistance though, seen at 1.2258-86 before we get to the bigger levels highlighted above.

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