GBPUSD is testing fresh 2-week highs at 1.2951. The pair has made a sharp recovery following a bounce from 1.2773 last week but has met resistance at the 50-day moving average (MA). The broader picture on the daily chart shows that the market is neutral.
GBPUSD is currently at a critical level with immediate support at 1.2925 – the 50% Fibonacci retracement level of the upleg from 1.2588 to 1.3267. As long as resistance holds at the 50-day MA, prices are expected to resume the downtrend from 1.3267 (August 3 high).
A move below 1.2925 would shift focus to the downside to target 1.2773 (August 24 low) and from here the next target would be the 200-day MA at 1.2655 before reaching 1.2588 (June 21 low). Such a move would shift the medium-term outlook from neutral to bearish.
Alternatively, a sustained move above the current level of the 50-day MA at 1.2953 would target the key psychological level at 1.3000. This would favor further strength with the potential to re-test the August 3 peak at 1.3267.
The neutral outlook for the medium-term is expected to hold as long as GBPUSD remains capped by the 50-day MA and if upside momentum fades. RSI has been rising towards the 50 level. A continued move higher by the indicator into bullish territory would indicate risk is to the upside for GBPUSD.
