Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Chart Of The Day: GBP/USD Signaling Potential Upward Reversal

By (Pinchas Cohen/ 19, 2022 09:23
Chart Of The Day: GBP/USD Signaling Potential Upward Reversal
By (Pinchas Cohen/   |  Jan 19, 2022 09:23
Saved. See Saved Items.
This article has already been saved in your Saved Items

The UK's pound sterling is up about 0.3% Wednesday at time of writing, on dollar weakness. Today's rise trims Cable's 0.37% loss on Tuesday, the result of yesterday's USD strength.

During the previous three FX trading sessions—Friday through Tuesday—the pound was in decline, a mirror image of the dollar's simultaneous advance.

The GBP/USD pair's price has been dominated more by the state of the US economy rather than that of the UK. It has surprised us that the dollar has weakened since the Fed tilted more hawkish.

When the central bank starts on a path to reducing the available dollar supply and increasing interest rates, it's a no-brainer that demand for the greenback will accelerate. Of course, the opposite has been happening since the Fed surprised markets on Dec. 15 after revealing there were no longer any dovish policymakers left. After an intraday bump of 0.35% post-FOMC meeting, the dollar closed 0.06% lower on the day, the start of a slide that reached as much as 2% as of Friday. As well, since that mid-December day, the Dollar Index is still more than 1% lower.

Sterling experienced the opposite reaction. After dropping 0.5% during the session on Dec. 15, sterling closed 0.19% higher. The UK currency has gained as much as 3.87% since then until Thursday, but is still +3.05% since the Fed's surprising turn.

On the economic front, the British economy grew past pre-pandemic levels in November. The country's GDP expanded by 7% YoY, but that doesn't take into account the recent impact of Omicron, which is expected to disrupt that recovery.

What does that mean relative to the US economy? Unfortunately, that's murky. While Moody's sees the US economy as being stronger than Omicron, rising prices because of previous lockdowns may change that outlook. Moreover, China's economy could surpass that of the US by 2030, and Goldman Sachs forecasts the euro area economy could overtake America's in as little as two years.

In other words, anything could happen. All a trader can do is try keep up with the rapidly changing environment. Here's how that translates into the GBP/USD supply and demand equation on the technical chart.


Cable remains in a peak-and-trough downtrend. However, the first sign of a potential reversal appeared when the currency pair broke to the topside of its falling channel.

The 200 DMA blocked the price from extending the advance to post a peak higher than that of late October. However, the price found support above the 100 DMA and the top of the broken falling channel, which could be resting stops for bulls before tracking above 1.3840, which would be another potential sign in favor of an upward reversal.

Trading Strategies

Conservative traders should wait for the price to extend the downtrend by posting a low below the Dec. 8 trough and short, or establishing an ascending series of peaks and troughs and join the market in trading higher.

Moderate traders would risk a long position if the price closes at these elevated levels and retests yesterday's lows for a close entry.

Aggressive traders could enter a long position according to a plan that addresses their timing, budget, and risk aversion. Here is a basic example:

Trade Sample - Aggressive Long Position

  • Entry: 1.3630
  • Stop-Loss: 1.3580
  • Risk: 50 pips
  • Target: 1.3830
  • Reward: 200 pips
  • Risk-Reward Ratio: 1:4
Chart Of The Day: GBP/USD Signaling Potential Upward Reversal

Related Articles

Chart Of The Day: GBP/USD Signaling Potential Upward Reversal

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email