Market Overview

GBP/USD Faces Resistance at 1.3850

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The GBP/USD continues to press forward with its long-term downtrend but there are still opportunities for bullish currency investors that are looking to capitalize on opportunities at lower levels.  After seeing some critical changes in the need for higher interest rates, the Bank of England has quickly started to alter its stance and this is leading to a turnaround in the GBP off of its prior lows.

 

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Traders that are looking to take a position in the GBP/USD must understand that there is a large amount of momentum in the bearish direction and that any trades taken here should have relatively tight stop loss levels.  To the topside, there is now clear technical resistance in the 1.3850 zone and this is the first bullish target for long positions from here.

 

Ultimately, we are looking at an emerging uptrend channel on the shorter-term charts and this is coming into somewhat strong trendline resistance near 1.35.  The Commodity Channel Index is now holding at middle levels, so there is clear room to extend higher and the GBP will likely he helped further by suggestion that building inflation in the UK economy could make price stability less manageable.  

 

This could require the Bank of England to start making additional changes in its interest rate outlook, and tighter monetary policy will likely push the GBP into prior resistance levels.  Using the best forex trading indicators for this currency pair, it is possible to assess the broader trends that have quickly become apparent in the GBP/USD.  We are looking to establish longs in the GBP/USD at current levels, with our stop losses placed at 1.3030.  This places risk-reward ratios in favorable territory and forex traders can build longs into these lower support areas to improve average entry prices.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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