A wide road for buyers and sellers
The GBPUSD trended higher rapidly on Friday and again on Monday on the back of a weak jobs report in the US, and election results in Scotland.
When the price rises so quickly - with little in the way of corrections - the spread between the 100 and 200 hour MAs can stay very wide. Why? Well the price just trended higher quickly. So the MAs are still working hard to catch up. Looking at the hourly chart, the 100 hour MA is still moving higher despite the two day decline.
The fall yesterday did take the price down toward the rising 100 hour moving average (with a modest break into the close). Today, after a move higher in the Asian session saw the price move back above the 100 hour moving average, the sellers returned against the initial swing low off the CPI yesterday at 1.40793 and the price action moved back to the downside.
Typically, the 200 hour moving average is tested on the second move lower, but given the lag in "catching up" it still is a ways away. In fact, the spread between the 100 hour moving average at 1.4083 (and still moving higher) and the 200 hour moving average 1.3988 (which is trying to catch up) is close to 100 pips. That is wide.
So what to do?
The pair is trading between the two moving averages (and making new NY session highs at 1.40508. The 38.2% retracement at 1.40262, and the modest swing low from Monday's trade at 1.40141 is interim support (ahead of the rising 200 hour MA). The price on the data moved below the 1.40141 level, but quickly failed, and rotated higher. Look for risk to the reestablished between those two levels.
On the topside, the 1.40793 to 1.40831 (100 hour MA) remains resistance. Look for sellers against that area on another test (with stopped on break above).