Although the GBPUSD pair has been on a sharp rise the last couple of days, there are some signals on the daily chart that this recent upswing may be coming to an end. For one, the pair attempted to break the falling trendline. Secondly, a doji has formed at the end of a upswing, signaling that buyers may be running out of steam to bring the pair any higher. Thirdly, there could be some bearish divergence on the pair, with price registering lower highs, while stochastics is showing higher highs. If sellers do succeed in bringing a reversal, look for the pair to test previous support and resistance at 1.6120. Of course, buyers may still have something left in them and could possiblly attempt to break the trend line once again. If they succeed, they could aim for the previous highs just above 1.6700.
It seems like no matter what sellers do, at the end of the day, buyers remain victorious. Notice how buyers keep taking the pair back north whenever a significant support level is touched and whenever stochastics hit oversold conditions and crossed-over. Well, as the old saying in trading goes, “the trend is your friend” and “buy on the dips”. The pair is currently trading just a couple of pips above 1.4900 after bouncing from the ascending trend line. If the trend line holds, we might see the first test of 1.5000 this year. I would be careful though, as the rally seems overextended. If the rising trend line breaks, we could see the pair head all the way back to support at 1.4800.
Lastly, let’s end with a glimpse at the EURJPY cross. The pair has been consolidating as of late and has formed a symmetrical triangle after breaking past a falling trend line last week. The pair has simply been bouncing up and down, indicating that we may see a strong break out soon. If the pair breaks out to the top side, we could see the pair test 136.00 price level once again. If it makes a clean break, it may zoom up and test for new highs at 137.00. If on the other hand, the pair breaks to the down side, it could test the 134.00 handle, which was previously an area of interest.