On the daily chart below for the GBPUSD, we can see that the pair has been in a range since last December. In the past two months though, the buyers started to make new higher highs and threatening a breakout. They kept on leaning on the red long period moving average and given a weak US Dollar , eventually succeeded to break above the 1.2444 resistance.

This breakout is now being threatened by a fall back below the 1.2444 level. This may turn into a big fakeout and what follows such moves is generally a big reversal. We can see how reliable the moving averages have been in determining the trend. If the price falls back into the range, we will get a cross to the downside and the trend bias would switch to bearish with the support at 1.1840 being the natural target.

GBPUSD technical analysis

On the 4 hour chart below, we can see how the price was ranging at the 1.2444 high before eventually breaking out. The price topped soon after and the market started to fall back towards the 1.2444 level where the market bounced. The price pulled back to the top of the range and the red long period moving average before selling off again. We can see that the whole move up towards the 1.2650 level was diverging with the MACD, which is generally a sign of weakening momentum and it’s often followed by pullbacks or reversals. We got many pullbacks along the way, but the one we are seeing now looks like a reversal in its early stage.

On the 1 hour chart below, we can see that the fall into the 1.2444 level was diverging with the MACD signalling a possible pullback to come. Sure enough, the price pulled back to the 38.2% Fibonacci retracement level and the top of the range before selling off this morning as UK labour market data missed expectations. The sellers will now eye a break below the 1.2444 level to extend the selloff, while the buyers will need a break above the 1.2540 to regain control and make new higher highs. Today, the US Retail Sales report is expected to be a market moving event, so watch out for that.