The GBPUSD runs toward the 50% midpoint/200 day MA, and backs off.
Trades at the highest level since early July
The GBPUSD has run higher for the 2nd consecutive day today. The price from the low to high yesterday has moved from a low of 1.2203 to a high today of 1.2683. That totals 480 pips. Not a bad run, but putting things in perespective, the price has been much higher in 2019 without a deal. The high for the year is up at 1.33795. The high from 2018 was up at 1.43762. Big picture (see monthly chart below), the pair is nearer the low than highs.
Technically, the high price today was able to get above the 50% midpoint of the 2019 trading range (from the high in March to the low in September - see daily chart below). That level comes in at 1.26687. The next major target above that level is the 200 day MA at 1.27103. The price has not traded above the 200 day MA since May 14th. The last time the GBPUSD was above the 200 day MA level was back on June 28
Drilling all the way to the 5 minute chart, you can see the steps higher today more closely and it tells a story.
- The low bounced off/near the 100 day MA. Bullish.
- The first run higher corrected to around the 38.2% of that move at 1.2488. Bulish.
- The 2nd run higher also corrected toward it's 38.2% and found early buyers.. Bullish.
When the price corrections of trend leg highers have shallow corrections of the legs, that give buyers confidence.
Now, the 3rd leg higher was the one that moved above the 50% midpoint of the year at 1.26687. The price spiked above that level but only for less than 5 minutes. That is not so bullish. So the correction lower took the price below the 38.2-50% of that leg higher.
However, the good/bullish view from that correction is the low stalled at the high from the 2nd leg higher at 1.25881. The price is trying to climb higher.
The sharper correction against some decent resistance above at the 50% and 200 day MA area, is indicative of some profit taking. The correction was greater than the other legs and could be indicativve of a more balanced market against resistance. So traders may look to sell against the 50% just because there may be disappointment in the hope for a deal.
So watch the 50% level. There may be some cautious selling but if it breaks above, I would also be reluctant to hold any shorts (so it is on a short leash). The move is strong but it can have room to run if it contnues to get the good news. Just look at the longer term charts. They have room to roam on a successful Brexit.