GBPUSD reaches a target area
The GBPUSD reached a swing area that sits below the recent price highs at 1.3812 to 1.38149 (see red numbered circles.
Often times, highs are made that fail. Subsequent highs then stall at a lower area ahead of the extremes (i.e. the 1.3812 to 1.38149 area - see red circles).
Looking at the hourly chart, there were swing highs in the 1.3812-1.38149 area on October 19 and 20 (see red numbered circles 1-3), rose above it to the October 19 high at 1.38337 and then reestablished the old high on October 22 at the 1.3812-149 level again (see red numbered circles 4,5 and 6).
That lower ceiling was again broken on Tuesday (October 26) where the price got to within 5 pips of the highs, and failed again.
Today, the old/lower swing level has once again been retested, and is holding (see red numbered circle 7).
What we know from the pattern is there is a dual resistance against the 1.3812 - 1.3149 and the 1.38287 to 1.38337 area. The lower area is holding resistance at least for now. Stay below we could see a further correction to the downside. Conversely move above and the highs are once again in play.
On the downside, the price surged above the 100 hour moving average at 1.3761, the 200 hour moving average at 1.37745, and the 100 day moving average at 1.3781. The highest moving average line (the 100 day moving average) is a risk/bias defining level. Even I correction if that level can hold, the buyers would still feel empowered and with more control.
So there is reason to sell against the 1.3812 – 1.38149 area. There is also a reason to buy on corrections lower especially against the 100 day moving average. For now, the market is taking a break after the sharp run higher in the US session.