Key Highlights
- The British Pound declined sharply and broke the 1.4080 pivot level against the US Dollar.
- There was a break below a key bullish trend line with support at 1.4170 on the 4-hours chart of GBP/USD.
- The pair is in a major downtrend and any recovery is likely to face resistance near 1.4000-1.4020.
- The US New Home Sales in March 2018 increased 4% (MoM), more than the forecast of +1.9%.
GBPUSD Technical Analysis
A major downside move was initiated from the 1.4350 resistance in the British Pound against the US Dollar. The GBP/USD pair declined by more than 300 pips during the past few days and settled below 1.4000.
During the downside move, the pair broke a major support at 1.4200, which opened the doors for more declines. As a result, there was a break below a key bullish trend line with support at 1.4170 on the 4-hours chart.
More importantly, the pair settled below the 100 (red) simple moving average (4-hours) and the 200 (green) simple moving average (4-hours). It traded as low as 1.3918 where buyers protected further losses.
At the moment, the pair is consolidating losses above the 1.3920 level. An initial resistance is around the 23.6% Fib retracement level of the last decline from the 1.4246 high to 1.3918 low. It seems like there is a strong barrier forming around 1.4020 since it acted as a support earlier.
If the pair corrects higher, it could face a strong resistance around 1.4000-1.4020. A break above the 1.4020 resistance may perhaps open the doors for a push towards the 50% Fib retracement level of the last decline from the 1.4246 high to 1.3918 low at 1.4080.
On the downside, the recent low at 1.3918 is a decent support. A break below 1.3918 would expose the pair to more losses in the near term.
Recently, the US New Home Sales report for March 2018 was released by the US Census Bureau. The market was looking for a 1.9% rise in sales compared with the previous month.
The actual result was better as there was a rise of 4.0% in sales. Moreover, the last reading was revised up from -0.6% to 3.6%. Thus, the overall increase was very positive.
To sum up, GBP/USD may correct higher in the short term, but it won’t be easy for buyers to break the 1.4020 and 1.4080 resistance levels.
