GBPUSD opened the day with strong positive momentum with scope to breach its simple moving averages (SMAs) currently within the 1.3780 – 1.3810 area.
The bullish action is invoking a sense of déjà vu from late July, when attempts to pierce the 50-day SMA evaporated around the dashed descending trendline.
From a technical perspective, downside corrections cannot be ruled out as the Stochastics are entering the overbought area, suggesting the bulls could soon run out of fuel. Nevertheless, the indicator has yet to peak within that territory and the RSI is looking to extend its uptrend above its 50 neutral mark, while the MACD continues to gain ground above its red signal line, overall endorsing the buying appetite in the market.
Of note, however, the 20-day SMA has confirmed a double bearish cross with the longer-term SMAs, whilst the 50- and 200-day SMAs are also set to negatively intersect each other, raising questions about whether the recent upside correction can activate the long-term uptrend above the 1.4248 peak.
In the meantime, a decisive close above the SMAs and the dashed trendline at 1.3830 could see an extension up to the 1.3874 resistance. A successful move higher from here could then challenge the 1.3982 – 1.4000 restrictive region, a break of which would open the door for the 1.4100 psychological mark.
Should the bulls give up the rally around the SMAs, the price could reverse southwards to meet support near 1.3692. Sliding lower, all eyes will turn to the 1.3600 bottom, where any violation would bring the downtrend from the 1.4248 back into play, likely triggering a steeper decline towards the 1.3500 level and the broken descending trendline.
In brief, GBPUSD is currently viewed as cautiously bullish as the price is approaching a crucial resistance territory. A decisive close above 1.3830 could ease fears of a downside reversal.
