GBP/USD Returns to Key 1.30 'Make or Break' Level where Recovery will be Challenged
Image © DragonImages, Adobe Stock
- Rebound sees Sterling retouch 1.3000 rubicon
- A break above could mark bullish short-term trend-change
- Daily close above 200-day MA could be key
The Pound-to-Dollar exchange rate has risen back up to touch the key trend-defining 1.3000 level after dipping temporarily below it during the previous week’s trading.
This was a key support level previously, which has now reversed roles and become a resistance level that might keep further advances by Sterling in check.
A trendline drawn from the early March highs is further resisting at a similar level, as illustrated on the chart below.
The rise has come about mainly as a result of gains made on Tuesday when the pair rose by over half a percent. The big question now is whether the exchange rate can break above this nexus of resistance at 1.3000 or whether it will be rejected and end up declining from here.
Much depends on today’s close and how high it is - particularly whether it closes above the 200-day moving average (MA) at 1.2961. If it does, it will be a very positive sign for the exchange rate; if not the rebound is more likely to have been just a correction rather than anything more substantial.
The bearish case is neatly summed up by Richard Perry, a market analyst at Hantec Markets, who analysed the pair in a piece earlier on Tuesday morning when the market was less bullish.
“Resistance of a six-week downtrend comes in at $1.3010 today and is a confluence with the old key support area at $1.3000,” says Perry. “This is all now a basis of resistance and rallies look to be a chance to sell. The hourly chart shows initial support at $1.2900 but a breach would suggest the bulls have given in. A retest of $1.2865 looks likely in due course before further downside to test $1.2700/$1.2815.”
Since then, however, the market appears to have picked up steam and Tuesday’s long up-day so far looks stronger-than-usual on the daily chart.
As for fundamental drivers - the Dollar appears to be giving back gains it made last week on the back of the anticipation of stronger GDP data after the detail underlying the headline beat was found wanting.
Sterling, meanwhile, could have been making gains as a result of rumoured progress in cross-party talks between the Labour and Conservative parties to reach a Brexit deal agreement.
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