GBPUSD has recouped most of its losses for the past few trading days. Yesterday marked the third consecutive day of gains for the currency pair, can it extend its winning streak even further?
If buyers can sustain their gains, we could see GBPUSD trade higher to around 1.2755. This price offers a confluence of potential resistance. For one, it coincides with the 200 SMA. Secondly, this price level also coincides with the currency pair’s previous lows. What could fuel the rally on GBPUSD? As we have seen in USDCAD and AUDUSD, risk currencies tend to benefit from fiscal actions by governments. Should the UK government announce its official relief package, the British pound could benefit.
On the other hand, if risk aversion continues to dominate market sentiment, we could see GBPUSD give up its gains. It’s worth point out that the currency pair is trading around the 50% Fib level (when drawing the Fibonacci retracement level from the high of March 9 to the low of March 20). This price also coincides with the low of October 9.
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A closer look at the 4-hour time frame also shows that GBPUSD is testing resistance at the 100 SMA. Reversal candlesticks at its current price level could mean that GBPUSD could fall. Near-term support is at 1.1850 where the neckline of the previous double bottom and the 50% Fib level (when drawing from the low of March 23 to today’s high) coincide.
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