GBP/USD has been trading in a recovery mode since Friday, when it hit support at 1.3365, and yesterday, it managed to overcome the downside resistance line drawn from the high of January 14th, as well as the 1.3525 barrier, marked as a resistance by the peak of January 26th. In our view, this has turned the short-term picture to positive.
We believe that the break above 1.3525 may have set the stage for advances towards the 1.3605 barrier, marked by the inside swing low of January 19th. The bulls may decide to take a break after hitting that zone, thereby allowing a short-term setback. However, as long as such a setback remains limited above the 1.3525 zone, we would see decent chances for a rebound and another test at 1.3605. If that barrier fails to stop the bulls this time around, its break may allow the bulls to climb towards the 1.3660 territory, marked by the peak of January 20th.
Shifting attention to our short-term oscillators, we see that the RSI got closer to 70, and appears ready to move above that level, while the MACD lies above both its zero and trigger lines, pointing up as well. Both indicators detect strong upside speed and corroborate the notion for further advances in this exchange rate.
In order to abandon the bullish case, we would like to see a clear dip below the key support of 1.3365. The rate would already be well below the aforementioned downside line taken from the high of January 14th, while the dip below 1.3365 would confirm a forthcoming lower low. The bears could then get encouraged to dive towards the 1.3275 zone, marked by the inside swing high of December 21st, the break of which could allow extensions towards the 1.3200 barrier, marked by the low of that same day, or the 1.3173 hurdle, which acted as a floor between December 8th and 20th.
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