The GBPUSD held below 100 week MA last week. Does that lead to downside this week?

Technical Analysis

Author: Greg Michalowski | forex

Ends the week near Friday high and 100 hour MA

On Monday last week the GBPUSD toyed with the 100 week MA at the 1.3300 level. The high reached 1.3311 but being a weekly MA, the level was more of a barometer for bullish above and bearish below (which is ok).  Obviously, the buyers could not push higher and by the end of Monday, the sellers started to take control. 

 

That move pushed the price to a low for the week on Friday at 1.3087 where a rally began after a failed break below swing lows at the 1.3122 level (see hourly chart below).  

That rally higher stalled in the NY session, around the 100 hour MA and trend line resistance. The 100 hour MA and trend line come in at 1.31878.  Also near the area is the 38.2% of the move down from the October 13 high at 1.31826.  

So we:
  • Started the week by failing at a key longer term MA on Monday at the 100 day MA
  • Ended the week, correcting higher but stalling at a key intermediate MA, downward sloping trend line and retracement level
Sellers have more of the edge as the clock stopped on Friday, but the bias and control can shift in the intermediate term more to the upside too.  What would do that?

Staying on the hourly chart, the area that would have me concerned (for shorts that is), is if the price were to move back above the 1.3212-266 area (yellow area in the hourly chart below). That area is home to the:
  • 50% retracement
  • 200 hour MA at 1.3216
  • 100 bar MA on the 4-hour chart.
Moreover, the price would be moving away from the 100 hour MA and the downward sloping trend line at 1.31878 area. 

That is the risk for the shorts.  

If seller stay in control by keeping the price below the aforementioned levels, the level to remember is the 100 day MA. That currently comes in at 1.3044 (and moving a bit higher each day).  


Although the price traded below the 100 day MA in August (that was the last time) there have only been about 5 closes below the 100 day MA since April.  A move below that MA would potentially open up the downside for more selling momentum (1.3017 is the 38.2% AND the 1.3000 natural level would be levels to get below too).