Charts Warn Losses for Pound / Dollar Exchange Rate Look Likely

GBP/USD is looking increasingly top-heavy warns a noted technical analyst we follow.

Matthew Ashley, FX Research Analyst for Blackwell Global, has warned that GBP/USD has been running into some stiff resistance over the past week and is not showing the requisite fight to break higher.

The Pound to Dollar exchange rate is still up 4.45% month-to-date but on the week we are looking at losses of 0.21%.

Thus, near-term momentum is seen waning.

“We can’t ignore the presence of the bullish channel that has been making itself felt over the past few months. Specifically, the current position of the Cable relative to the upside of the channel will be generating some notable selling pressure as it is fast becoming apparent that the bulls don’t have the juice to breakout into the 1.30 – 1.35 band,” says Ashley.

Ashley is a technical analyst, someone who cuts through the noise of fundamentals and politics by studying the structure and intentions of the market.

“The pair’s fundamentals have been rather mixed which makes establishing a firm bias somewhat difficult. Due to this, we may have to rely on the technicals to get a feel for what could be on the way in the days to come,” says Ashley.

A number of instruments are also signalling that support is evaporating for the Pound we are told.

Ashley says the stochastics are undoubtedly in overbought territory, “which will surely be gearing the bears up for a comeback”.

Furthermore, the MACD oscillator is mid-signal line crossover which typically denotes a shift in trend direction.

“If we do see the Cable make an about face and move into decline once again, we currently expect to see it fall back to around the 1.2667 handle. Here, support should prove to be rather robust as the 38.2% Fibonacci level and the 100 day EMA should work in concert to limit losses substantially. Also worth mentioning, this price coincides with a reoccurring reversal point which can only add to overall support around this level,” says Ashely.

Blackwell Global acknowledge that whilst we have taken a fairly technical view and they don’t want ignore the fundamentals entirely as they could still generate some intra-day volatility or muddle the decent back to support.

“This being said, both US and UK figures have been rather mixed recently which could mean they largely offset one another, leaving the pair especially open to technical influence,” says Ashley.