- GBP/USD breaches channel support, yet doji candles on the daily chart indicate a momentary pause in the trend.
- Momentum indicators suggest potential for deeper corrections as volatility rises and bulls find it hard to regain dominance.
- The GBP/USD weekly chart hints at a deterioration in the medium-term outlook.
GBP/USD stands at a crucial point, caught between declining bullish momentum and rising bearish pressure. The doji candles from Thursday’s daily chart show a temporary halt, lacking clear indications that buyers are stepping in to defend the 1.3390-1.3370 zone.
While the candles haven’t closed just yet, this kind of price movement often suggests that lower levels—or at least some buyer interest—might be near key support. Although we haven’t observed a reversal yet, both sides are gearing up for the next move.
GBP/USD clings to crucial support as sellers tighten their grip
Currently, GBP/USD is trading below a rising channel, lingering just above 1.3400, particularly around 1.3390, which aligns with the 23.6% Fibonacci retracement of the January-July rallies.
The price action sits below the 50-day Simple Moving Average (SMA) resistance at 1.3505 and the 20-day SMA at 1.3579, revealing a clear loss in short-term bullish momentum.
The trouble is, repeated failed attempts to hold and breaches below the channel structure above the psychological barrier of 1.3500 suggest that sellers are gaining a stronger foothold.
Looking at momentum indicators, the Relative Strength Index (RSI) is hovering around 39, nearing oversold territory, but not quite there.
On the flip side, the average true range (ATR) is approximately 0.00927, showing that daily volatility has compressed to about 92-93 pips. Historically, when the ATR contracts like this, it may precede a breakout, which traders should keep in mind as volatility ramps up, particularly near critical technical levels.
If prices dip below 1.3390, the next downside target could be the 100-day SMA at 1.3281, followed by the 38.2% Fibonacci level around 1.3144.
The message here indicates that short-term selling pressure is still mounting, so for bulls to shift sentiment, they’ll need to reclaim the 50-day SMA and bounce back above the 1.3575 range.
GBP/USD Daily Chart
GBP/USD weekly charts hint at a decline in the medium-term outlook
Stepping back, the GBP/USD weekly charts clearly show a bearish transition. The steep rejection from the July high of around 1.3789 served as the first red flag, signaled by a long upper wick. Last week’s bearish candle closed decisively near the lowest point in the channel support, showcasing significant and sustained selling pressure. This wasn’t merely a pullback; it was a strong downtrend.
The weekly candle as it stands now shows a minor low wick after bears struggled to breach the 23.6% Fibonacci level on Thursday. However, the overall candle’s body is influenced by last week’s downward momentum. The lack of notable low wicks thus far suggests minimal buying pushback, reinforcing the notion that sellers are firmly in control right now. This forms a classic bearish continuation signal, particularly in light of its formation within a vital support zone around 1.3390.
If this price action holds through the end of the week, it could signify a solid breach below the 23.6% Fibonacci retracement, potentially setting the stage for deeper declines, including a 20-week SMA at 1.3299, followed by the 38.2% retracement at 1.3144. The momentum is evidently deteriorating, and the structure of this week’s candle complicates matters for bulls aiming for a short-term bounce unless there’s a significant turnaround before Friday wraps up.
The weekly RSI, nearing 57, implies that while the broader trend remains intact, momentum is decidedly weakening.
USD/GBP Weekly Chart
With critical support and volatility being tightly compressed, the pair is nearing a tipping point. Whichever side manages to assert control could dictate the direction in the upcoming weeks.
