GBPUSD turned increasingly bullish in the short term after crossing above the 50-day moving average and key 1.3000 level on September 5. The odds for a bounce higher have diminished though since prices moved back below 1.3200 after hitting a high of 1.3223 this week.
Upward momentum was not maintained as the market became overextended. This is evident in the stochastics and RSI which reached overbought levels (above 80 and near 70 respectively). Consequently, AUDUSD retreated from 1.3223.
In the near term, there is limited downside risk as trend signals are bullish. The 50-day and 200-day moving averages are positively aligned after a bullish crossover in mid-May. Firm support is expected at 1.3000 and at the 50-day moving average. A drop below support at 1.2773 (August 24 low) and below the 200-day MA would bring a little more softness in the outlook for GBPUSD.
Any gains above the 1.3200 resistance level would see a move to re-test the previous high at 1.3267 and shift the bias to a more bullish one. Clearing this top would open the way to target the next major peak from a year ago at 1.3444.
Looking at the medium-term picture, it appears that the market has been ranging since July and has been pivoting around the key 1.3000 level, giving a neutral bias. Trend indicators are neutral to bullish and have not given any signs of a reversal yet. The recent strong rally from the sub-1.2800 area has lost steam at 1.3200, keeping the past 2-month range intact. The short-term bull run from sub-1.2800 has room to advance higher.