FaithMight

With cable starting the week below the huge psychological level at 1.6000, it seemed the currency pair was finally gathering steam to make a real break lower to 1.5850. However, 1.5900 remained staunch support and stronger-than-expected UK data has launched the $GBPUSD back above 1.60.

After moving above 1.60 AND holding the 1.6020 level yesterday, $GBPUSD started to look quite bullish. Back in October, a similar move was met with new highs some weeks later. It seems we may have the same price action again in November. Since holding above 1.6020 yesterday, $GBPUSD has made a seriously bullish move to make highs so far at 1.6117. However, there is plenty of resistance above the week’s new highs.

Price has been capped by the 61.8% Fibonacci level with 1.6130 and 16160 resistance levels not too far above that. As long as price remains above 1.59 support and 1.60 psychological level, $GBPUSD has the potential to return to 1.6250 resistance and make a real effort to 1.6300. Another interesting observation is that $GBPUSD has yet to turn bearish even with a daily or weekly close below 1.60. Each time is seems as though the USD will gather momentum, GBP bulls have proven more resilient. Will the bulls finally muster the strength needed to take out the 1.63 highs?

For several weeks now, the $GBPUSD has been trying to either retrace to the 50% Fibonacci at 1.5850 or break out higher above 1.6250. Neither has happened as last week 1.6250 resistance capped any rallies and the 1.5900 support level that has emerged in recent weeks has buoyed dips.

This week opens with $GBPUSD again at 1.59 support unable to continue lower. Thanks to the better-than-expected manufacturing PMI release, this corrective rally should find resistance into 1.60 if price is to move lower and finally break the 1.59 support level.

The fundamental landscape remains positive for GBP. UK economic data is robust into the fall season proving to bulls that the summer recovery may actually have legs. After a quiet couple weeks, we get a slew UK data this week plus an interest rate decision from the Bank of England. While the market expects the BoE to remain on hold with monetary policy, data this week may cast the central bank in a hawkish light. Price moves will be sensitive to data releases into Thursday’s rate decision. Be mindful of the calendar and key levels this week.

Friday’s close below 1.60 is a big deal for bears. It marks its first close below 1.60 after rallying for nearly 4 consecutive weeks.

Zooming in a bit to a weekly chart, we can see that a Friday close below 1.60, in most cases, led to a continuation lower.

It is also particularly bearish that the recent rally put in a lower high at 1.6250 than the previous 1.63 top. Perhaps cable will break out of this massive consolidation pattern after all and lead us back to 1.35. Before then, however, the Fibonacci levels on the weekly chart provide a 1st area of support and decision-making for bulls and bears.

$GBPUSD bulls just won’t give up. Every single time we have honored a previous high as support, we have seen cable take off to new mid-term highs.

Here is Exhibit A, the daily chart from September 19th:

 Here is Exhibit B, the 4hr chart a week later on September 26th:

Now here is today’s 4hr chart:

Bulls and bears are fighting it out, yet again, at a former high. Every battle won by the bulls have led to breakout rallies. A battle won by bears could see price fall to the level of support at 1.6130 which is also another former high (See Exhibit B). Below there is 1.6106, the 50% Fibonacci retracement level of this latest bullish wave. I don’t believe bulls will be truly done until 1.63 is challenged. These former highs are excellent areas for bulls to reload and gun for the ultimate prize above 1.6300.

Trade what you see.