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Fan Yang

GBP/USD Waiting to Breakout of a Range

GBP/USD has found support near 1.5590 last week. This week, an attempt to break it failed, giving cable a double bottom outlook. However, as we wind down the week, we saw a failure to break above 1.5735, which makes the structure more of a sideways consolidation range instead of a double bottom.

GBP/USD 4H Chart 11/21

(click to enlarge)

Looking at the 4H chart, we observe bearish conditions:
1) The 200-, 100-, and 50-period SMAs are sloping down and are in bearish alignment.
2) Price is holding below the SMAs.
3) The RSI is holding below 60, showing maintenance of the bearish momentum.

A break below 1.5590 therefore would simply continue the prevailing downtrend, which is the more likely scenario since we had no major shifts in fundamentals. The sterling's strength this week was based on the BoE minutes being not as dovish as expected. 

The width of the range is about 145 pips. If we project 145 pips below 1.5590 upon a break down of the range, the 1.5445-1.5450 area comes into play. However, to the upside, we should limit any break above 1.5735 and anticipate sellers in the 1.58-1.5820 area, which represents the support of a previous consolidation area earlier in November.

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