A Small Correction Before Another Leg Of Buying?

Overall, GBPUSD continues to trade well above a medium-term tentative upside support line drawn from the low of March 8th. From the shorter-term perspective, the pair is balancing above a short-term tentative steep upside line, taken from the low of November 1st. From the beginning of December, we can see that GBPUSD might have formed somewhat of a double top pattern, with the “neckline” being around the 1.2615 zone. Given that the rate has fallen below that “neckline” already, this may have opened the door to some lower areas. That said, this move lower might still be classed as a temporary correction, before another leg of buying. That is as long as the pair continues to run above that steep upside line.

As mentioned above, after breaking below the 1.2615 hurdle, the pair may slide a bit more, possibly targeting the previously-discussed short-term steep upside line. If that line acts as a strong support, the buyers might take advantage of the lower rate and lift it back up. GBPUSD could then travel back to the 1.2615 obstacle, or even to the 1.2733 zone, which is the highest point of November. If the bulls are still not satisfied, a break of the highest point of November would confirm a forthcoming higher high, possibly clearing the path towards the 1.2800 hurdle, or to the area near the psychological 1.3000 territory.

Alternatively, a break of the aforementioned steep upside line and a rate-drop below the 1.2456 could result in further declines. GBPUSD may fall to the 1.2374 zone, or even to the 1.2187 level. That level is marked by the low of November 10th. Around there we might see the pair testing the aforementioned medium-term upside line, which could add additional support.

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