GBPUSD has almost reversed the downtrend started at the beginning of February and the backdrop is looking bullish at the moment with price actions taking place above the Ichimoku cloud and all the simple moving average lines (SMA). Yet, momentum indicators suggest that there is not much space for additional gains.
Both the RSI and Stochastics are in overbought territory, suggesting that the market might show weakness in the short-term. However, the latter still needs to post a bearish cross to confirm that negative movements are on the way; if the blue %K line crosses below the red %D line, the next price move could be to the downside. MACD, though, continues to rise above zero and its red trigger line, giving some positive signals.
On the way up, immediate resistance could be found at February’s high of 1.4277 and then at the 1 ½-year peak of 1.4344. If the market manages to break this top, stretching the uptrend from 1.3038, the pair could pick up speed towards the 1.4400 handle before eyes turn to the 1.4500 psychological level.
Should the market change direction to the downside, the first stop could be at 1.4150, a level approached several times from the beginning of February onwards. A close below from here could find support at the 23.6% Fibonacci of 1.4036 of the upleg from 1.3038 to 1.4344, where the upper bound of the Ichimoku cloud is also located at the moment. A stronger barrier, though, could come between the 50-day SMA and the blue ascending line (1.3982-1.3930) because any substantial close below this area could increase chances for further downside movements, and lead prices even lower towards the 38.2% Fiboancci of 1.3843. In the worst case, prices could meet the 50% Fibonacci of 1.3688.
In the medium-term, the picture is expected to remain bullish as long as the pair holds above the 50-day SMA and the bullish cross between the 50- and the 200-day SMA stays in place.
