After riding the wave of the weaker Dollar, the British Pound may have temporarily reached the end of its rally this morning. In light trading, the GBP USD attempted to continue its almost month long rally with a drive through a major 50% level, but this move was thwarted by the lack of buyers.
Daily GBP USD Pattern, Price & Time Chart
Short-traders and profit-takers seem to have jumped on the chance to refresh their positions and exit longs respectively shortly after the market pierced the 50% price level of a major range. Based on the break from 1.6618 to 1.5271, a key 50% retracement level was created at 1.5973. This morning’s breakout above this level to 1.5999 and subsequent break back under the 50% price has put the market in a position to form a daily closing price reversal top.
A closing price reversal top doesn’t mean the trend has changed, but it often indicates the start of a 50% retracement of the last rally. This corrective move often lasts 2 to 3 days. Given the current rally from 1.5271 to 1.5999, a closing price reversal top could trigger a retracement back to 1.5635 to 1.5549 by Wednesday. In addition to this retracement zone target, traders should watch for a possible technical bounce following the first test of an uptrending Gann angle at 1.5751.
