Technical Analysis: British Pound, GBP/USD – Daily vs. 4-hour Setting
The British Pound’s recent breakout against the US Dollar is experiencing a pause following the formation of a Hammer candlestick pattern. However, a closer look at the 4-hour timeframe indicates a prevailing near-term bearish bias.
On the daily chart, GBP/USD has confirmed a breakout below the long-term rising trendline that has been in place since the end of last year. Despite this breakout, the recent price action has been somewhat undermining the descent.
A Hammer candlestick pattern, observed on August 3rd, suggests a potential bottom, especially in trending markets. As a result, there has been cautious upside follow-through.
Additionally, the 100-day Moving Average (MA) acted as support, reinforcing the upside technical bias. At present, GBP/USD is caught between the 1.2848 inflection point and the late June low of 1.2594. A clear break below the latter level would indicate a reinstatement of the near-term downward technical bias, while extending gains may lead prices to revisit the July peak of 1.3141.
Technical Analysis: British Pound
Switching to the 4-hour timeframe, a more detailed analysis reveals that the recent price action is aligning with the downward trajectory observed since July. On the chart, a Descending Channel pattern is evident, with a bearish Death Cross between the 50- and 100-period Moving Averages.
Despite the recent price action on the daily chart, the 4-hour setting strengthens the case for the continuation of the downward trend from the previous month.
Therefore, it may be premature to conclude that the British Pound is reverting to a broader upside trajectory. Traders should closely monitor the upper boundary of the Descending Channel and the 23.6% Fibonacci retracement level at 1.2946 for potential price movements. These key levels will provide important insights into the future direction of GBP/USD.
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