GBP/USD traded lower on Tuesday, after it hit resistance near the 1.2755 level overnight. The pair continues to trade above the upside support line drawn from the low of May 18th, but it has recently distanced itself from that line. What’s more, the current price action suggests a non-failure swing top pattern, which if completed may allow a deeper correction to the downside. Thus, although the broader trend remains to the upside, we see decent chances for more declines at the moment.
A clear break below 1.2585 would confirm the completion of the non-failure swing formation and may encourage the bears to dive towards the low of June 4th, at around 1.2500. If that level is not able to halt the slide either, then we may see the slide extending towards the 1.2425 barrier, marked by an intraday swing peak formed on June 1st. Slightly below that level runs the aforementioned upside support line, which could also provide support.
Looking at our short-term oscillators, we see that the RSI lies fractionally above 50, but points down and appears ready to cross below that equilibrium, while the MACD, although positive, lies below its trigger line, pointing down as well. Both indicators detect slowing upside speed and corroborate our view for further correction to the downside.
In order to start examining the resumption of the prevailing uptrend, we would like to see a rebound back above 1.2755. Such a move would confirm a forthcoming higher high and may prompt the bulls to target the 1.2865 hurdle, marked as a resistance by the inside swing low of March 10th. Another break, above 1.2865, may pave the way towards the peak of the day after, at around 1.2980.
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