GBPUSD is still trending higher on its longer-term charts and is testing the top of its ascending channel visible on the daily time frame. This could mean an opportunity for a countertrend play back to the support at 1.3100 or a correction setup there.
The 61.8% Fibonacci retracement level lines up with the bottom of the channel and a former resistance level. It’s also close to the 100 SMA dynamic support, which is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside.
However, stochastic is indicating overbought conditions and could be ready to head south anytime soon, which means GBPUSD might follow suit. If any of the Fib levels keep losses in check, price could head back up to the swing high at the 1.3650 minor psychological resistance again.
Risk aversion seems to be peeking back in the markets early this week as North Korea announced that the US has declared war on the hermit nation. This could mean more jitters in the days ahead and heightened tensions between the two nations that might limit risk-taking.
In the UK, Prime Minister May’s Brexit speech failed to revive bullish sentiment for the economy and its negotiating stance. More updates on this issue are set to hit the headlines with meetings between the top officials scheduled in the next few days.
As for the dollar, the Fed’s hawkish sentiment gave the currency strong support last week and it remains to be seen whether this could last or not, given the developments from North Korea. FOMC officials have several testimonies scheduled throughout so their policy stance could also push the Greenback around.
By Kate Curtis from Trader’s Way