As the GBPUSD reached its highest level since March 13, excitement grew among traders. However, this rally was short-lived as it quickly reversed lower. This sudden shift can be attributed to the fact that the market believed the rally had gotten overstretched. Momentum indicators eased, but still remained in positive zones, signaling a complex situation for traders.
A Steady Recovery Turned Unstable
In a steady recovery following a bounce off the 2024 bottom of 1.2298, GBPUSD saw the violation of both the 50- and 200-day simple moving averages (SMAs). While this might have seemed like a positive sign at first, the subsequent reversal highlighted the fragility of this uptrend. The recent support of 1.2669 could act as a first line of defence if the pullback extends further.
Resistance and Support Levels
If the retreat continues, traders can look for support around the 1.2598 mark, a region that has proven to be resilient in the past. Should the price slide beneath this level, the next target could be the February bottom of 1.2517. On the other hand, if the bulls regain control and erase the setback, immediate resistance lies within the 1.2816-1.2826 range. Breaking through this zone could pave the way for a push towards the 2024 peak of 1.2892, with further resistance at the July 2023 level of 1.2994.
The GBPUSD experienced a rollercoaster ride as it climbed to an almost three-month high before facing a drawback. Traders must remain vigilant and closely monitor key support and resistance levels to navigate the turbulent waters of the forex market. The unpredictability of the GBPUSD serves as a reminder of the importance of risk management and strategic decision-making in trading.