**British Pound Technical Analysis: GBP/USD Reverses Into Rally**
*Based on original analysis by James Stanley, Forex.com*
The British pound (GBP) has seen significant price action in 2024, with the GBP/USD currency pair displaying notable volatility and trend reversals. Amid global macroeconomic shifts, central bank policies, and changing risk sentiment, traders continue to focus on GBP pairs for both short-term opportunities and long-term positioning. This article provides an in-depth technical analysis of the GBP/USD’s recent performance, the catalysts behind its rally after a reversal, key support and resistance levels, and what traders should watch for in the coming weeks.
## GBP/USD Performance Overview
The GBP/USD pair, often dubbed “Cable,” reflects broader market sentiment towards the British economy and relative strength against the US dollar. In early 2024, the pair had been under pressure, trading lower as the USD benefited from haven flows and higher US yields. However, recent price action has seen GBP/USD stage a notable bullish reversal, catching the attention of technical traders and macro participants alike.
### Key Themes Influencing GBP/USD:
– **Central Bank Expectations:** Diverging rate path forecasts between the Bank of England (BoE) and US Federal Reserve
– **Economic Data:** UK inflation, wage growth, and economic activity data relative to US equivalents
– **Risk Sentiment:** Shifts in global equity markets, geo-political events, and overall appetite for risk assets
– **Dollar Movements:** Moves in the US Dollar Index as driven by US growth prospects and changing Fed rate hike/cut projections
## Technical Set-Up: Deciphering the GBP/USD Reversal
### The Bearish Move
In the preceding weeks, GBP/USD experienced downside momentum, breaking through key support levels and forming lower lows on daily and four-hour charts. Sterling bulls were on their heels as the pair slipped beneath the 1.2500 psychological support and targeted deeper retracement zones, suggesting a potentially bearish trend continuation.
– Downward momentum was evident with:
– Lower highs on daily timeframes
– Price trading below the 50-day and 200-day simple moving averages (SMAs)
– Negative MACD crossovers on H4 and daily charts
– Breaking supports at 1.2575, 1.2500, and 1.2450
### The Bullish Reversal
However, last week’s session saw robust buying interest emerge near major technical zones, sparking a reversal. Several technical factors powered this change in direction.
#### Key Catalysts for the Reversal:
– **Support at 1.2300-1.2350:** This demand area, tested multiple times in late 2023 and early 2024, proved resilient.
– **Oversold Conditions:** Momentum oscillators such as RSI signaled oversold conditions, suggesting downside exhaustion.
– **Bullish Divergence:** On four-hour charts, price made lower lows while RSI began forming higher lows, hinting at a potential bullish reversal.
– **Dollar Weakness:** The US dollar gave up ground as market participants reconsidered the Fed policy path, which further supported GBP upside.
#### Chart Observations:
– Engulfing bullish candlesticks on H4 and daily timeframes
– Reclaiming 1.2500 and closing above previous resistance areas
– Higher lows on the four-hour chart indicate a shift to short-term bullish structure
## Major Technical Levels for GBP/USD
A successful technical trader pays close attention to support/resistance levels on multiple timeframes and how price responds around them. The current rally warrants a reevaluation of the GBP/USD trading landscape:
### Critical Resistance Levels:
– **1.2635-1.2655:** Recent rally highs; breakout above this could point to further gains.
– **1.2735-1.2750:** Prior support now acting as a key resistance band; also aligns with the 200-day SMA area.
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