The GBPUSD teaches us a lesson at the 200 hour MA

The USDCAD moved down to test the 200 hour MA today. Like yesterday, the price bounced off that MA level for the 2nd consecutive day.

For the GBPUSD GBP/USD The GBP/USD is the currency pair encompassing the United Kingdom’s currency, the British pound sterling (symbol £, code GBP), and the dollar of the United States of America (symbol $, code USD). The pair’s rate indicates how many US dollars are needed in order to purchase one British pound. For example, when the GBP/USD is trading at 1.5000, it means 1 pound is equivalent to 1.5 dollars. The GBP/USD is the fourth most traded currency pair on the forex exchange market, giving it ample liquidity a The GBP/USD is the currency pair encompassing the United Kingdom’s currency, the British pound sterling (symbol £, code GBP), and the dollar of the United States of America (symbol $, code USD). The pair’s rate indicates how many US dollars are needed in order to purchase one British pound. For example, when the GBP/USD is trading at 1.5000, it means 1 pound is equivalent to 1.5 dollars. The GBP/USD is the fourth most traded currency pair on the forex exchange market, giving it ample liquidity a Read this Term, it is one on the stronger currency pairs today. The pair was up 124 pips at the high and has trended for most of the day.

That run to the upside today saw the pair:

• Initially move above the falling 100 hour MA (blue line in the chart above).
• In the early Asian session, the pair moved above the high from yesterday at 1.21067.
• Next, the 38.2% of the move down from the February 2 high at 1.2128 was broken.
• Finally, the 50% midpoint (move down from the high on Feb 2) at 1.21799 was broken.

However...the 200 hour MA was the limit for the rally (green line in the chart above).

The price tested that MA line (green line currently at 1.21892) and - like the USDCAD - reversed course.

The price has since moved back below the 50% and some lows going back to mid-January at 1.21665. The price trades at 1.2158.

What now?

We learned today, that the 200 hour MA attracted sellers (like the USDCAD USD/CAD The USD/CAD is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Canadian dollar of Canada (symbol $ code CAD). The pair’s exchange rate indicates how many Canadian dollars are needed in order to purchase one US dollar. For example, when the USD/CAD is trading at 1.3500, it means 1 US dollar is equivalent to 1.35 Canadian dollars. The US dollar (USD) is the world’s most traded currency, whilst the Canadian dollar (CAD) is the world’s seventh The USD/CAD is the currency pair encompassing the dollar of the United States of America (symbol $, code USD), and the Canadian dollar of Canada (symbol $ code CAD). The pair’s exchange rate indicates how many Canadian dollars are needed in order to purchase one US dollar. For example, when the USD/CAD is trading at 1.3500, it means 1 US dollar is equivalent to 1.35 Canadian dollars. The US dollar (USD) is the world’s most traded currency, whilst the Canadian dollar (CAD) is the world’s seventh Read this Term). Risk could be defined and limited against the level.

Traders leaned against that MA level, and are now feeling good about selling.

If the price were to move BACK above that level, the good feeling would go away, but until then, the sellers are in short term control. In addition to stalling the rally so far, it also increased the MA levels importance going forward. That is important information for traders.

What about other traders? What can they learn from the price action?

The lesson learned is the same. The 200 hour MA stalled the rally. On moves back toward the 200 hour MA level, traders SHOULD find sellers with stops above.

What if you like (are bullish) the GBPUSD?

In the short term traders can eye the 1.21496 - or below that - the broken 38.2% at 1.2128. If the buyers are to take control today - and the days going forward as well - those levels should now hold support (and not be broken).

The big lesson learned today, however, is the same from the USDCAD, the 200 hour MA is a risk defining level and for today it has helped to reverse moves in those pairs.