Undoubtedly, the trend is higher. In the past week, we have seen early selloffs every day but the sterling invariably recovers and rallies. Still, the charts show the pound is now entering an area of stiff resistance, so a correction could be in order.
First, lets take a look at the daily chart. Here, it’s easy to see the difficulty GBP/USD has had in breaking above 1.6700. In six attempts, it was immediately rejected in five with one short-lived breakout.
Lots of resistance ahead
Aside from the one breakout, the day following a failed retest of 1.67 has seen drops of at least 150 pips. The most recent failed test — on Oct. 27 — was followed by a nearly 400 pip fall.
On the hourly chart, we see the strong support around 1.6250 that has led to the push toward 1.6700. We also see early signs of the failed test of 1.6700 as the market opened higher to start the week but has quickly pulled back to unchanged levels.
Look for another powerful rejection of a 1.6700 in the day ahead or for a breakthough a short squeeze higher. No doub, it will be an interesting day for sterling traders.