The GBP/USD has rallied hard the past two weeks, but its upward climb has slowed down just shy of last year’s high of 1.3143.

Although the pair has pulled back, the price action suggests very strong bullish sentiment in the GBP/USD pair.

However, this optimism may be short-lived, as a less dovish (or even hawkish) tone from Fed Chair Jerome Powell’s upcoming speech could be the spark that ignites a sharp reversal!

Currency traders will be holding their breath as JPow prepares to speak at the Jackson Hole Economic Symposium on Friday at 10 a.m. ET. 

This highly anticipated event could be a turning point in shaping expectations for future interest rate cuts, ultimately influencing the trajectory of the U.S. dollar!

This year’s symposium theme, “Reassessing the Effectiveness and Transmission of Monetary Policy,” sounds exciting. 😴

While new interest rates or policies won’t be announced, Powell’s words will be scrutinized for hints about the Fed’s future plans.

Later on Friday, Bank of England Governor Andrew Bailey will also take the stage, but his speech may struggle to capture the spotlight.

It’s like being the opening act after a superstar performance. Following Powell’s highly anticipated speech is like Ed Sheeran trying to wow the crowd after Taylor Swift has already dazzled them.

As a result, Bailey’s message may not receive the same level of attention. 😢

Keeping this potential event risk in mind, let’s see what the technicals are saying about GBP/USD.

Welcome to TA of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of GBP/USD based on the 4-hour chart:

📈 Technical Analysis of GBP/USD 4-Hour Chart

Let’s analyze GBP/USD using key technical analysis concepts covered in our forex course.

Exponential Moving Averages (EMAs):

• 10-period EMA: Positioned around 1.3077. The price is currently just above this level, indicating continued short-term bullish momentum. The upward slope confirms the recent strong buying pressure.
• 20-period EMA: Positioned around 1.3042. The price is well above this level, reinforcing the ongoing short-term bullish trend. The upward slope of the 20-period EMA suggests that the bullish momentum is sustained.
• 50-period EMA: Positioned around 1.2957. The price remains above this level, confirming medium-term bullish momentum. The upward slope indicates that the medium-term trend is still in favor of the bulls.
• 200-period EMA: Positioned around 1.2854. The price is significantly above this level, highlighting strong long-term bullish momentum. The upward slope of the 200-period EMA suggests that the long-term trend remains intact.

Relative Positioning of Moving Averages:

• The 10-period EMA is currently above the 20-period, 50-period, and 200-period EMAs, indicating a robust short-term bullish trend within an overall bullish environment.
• The 20-period EMA is also above the 50-period and 200-period EMAs, confirming ongoing bullish pressure across all timeframes.

Moving Average Convergence/Divergence (MACD):

• The MACD line is slightly above the signal line.
• Both lines are above zero.
• This suggests that while the bullish momentum is still present, but may be weakening slightly.
• The histogram’s leveling off also indicates that the current uptrend could be losing steam.

🕵️ Key Observations

Price Action:

Let’s analyze the recent price action of GBPUSD based on the chart:

1. Strong Uptrend: The most notable feature is the strong uptrend.
2. Major Low: The most recent significant low was formed in early August around the 1.2670 level. This serves as the starting point for the current upswing.
3. Initial Upswing: From the major low, there was a strong initial upswing to around 1.2850 in mid-August.
4. Minor Retracement: Following the initial upswing, there was a minor retracement to about 1.2750, forming a higher low compared to the major low.
5. Second Upswing: The pair then swung upwards again, breaking above the previous swing high and reaching around 1.2900.
6. Consolidation: A brief period of consolidation occurred around 1.2850-1.2900, forming a tight range.
7. Breakout and Major Upswing: The most recent and significant swing is the strong upward move breaking above 1.3000 and reaching a new swing high.
8. Steepening Uptrend: The angle of the uptrend has become steeper with each swing, indicating increasing bullish momentum.
9. Minimal Retracements: The retracements between upswings have been relatively shallow, particularly in the most recent swing, indicating persistent buying pressure.
10. Swing Length: The length of the upward swings has been increasing, with the most recent swing being the largest.
11. Sharp Rally: There’s been a sharp, almost vertical rally in the most recent days, with the price moving from around 1.2700 to above 1.3000.
12. Breakout Above Resistance: The pair has broken above significant resistance levels, including the psychological 1.3000 level and the previous swing high around 1.3050.
13. Acceleration of Trend: The uptrend has noticeably accelerated in the last few candles, showing increased bullish momentum.
14. Recent High: The pair reached a new recent high of almost 1.3130.
15. Current Pullback: The most recent candle shows a slight pullback from the new high, potentially indicating some profit-taking or short-term consolidation.

Key Levels:

• 1.3000: Important psychological level, now acting as support.
• 1.3100: Next psychological resistance.

Support and Resistance Levels:

• Support: Immediate support is at the 10-period EMA (1.3077) and 20-period EMA (1.3042).
• Resistance: Psychological resistance at 1.3100.

🤔 Potential Trade Scenarios

Is GBP/USD a buy or sell?

The following trade scenarios are provided solely for educational purposes. Since they don’t include full risk management practices, they are not intended to serve as actual trade recommendations, but merely food for thought to help you generate your own trade idea.

Long Bias:

• Consideration Point: Consider entering a long position if the price finds support near the 10-period EMA at 1.3077 or on a pullback to the 20-period EMA around 1.3042. A breakout above the 1.3100 level could also provide a buying opportunity.
• Invalidation Point: Consider setting a stop-loss below the 20-period EMA at around 1.3030 to manage risk.
• Potential Target: Look for a move towards 1.3150 or higher if the uptrend continues.

Rationale: The strong bullish momentum, supported by the EMA structure, suggests further upside potential. However, caution is advised given the proximity to resistance and the slight weakening in MACD momentum.

Short Bias:

• Consideration Point: Consider entering a short position if the price shows signs of rejection around the 1.3100 resistance level or if there is a bearish crossover in the MACD.
• Invalidation Point: Consider setting a stop-loss above the recent high at around 1.31200 to manage risk.
• Potential Target: Initial target could be the 20-period EMA at 1.3042, with further downside potential towards the 50-period EMA at 1.29576.

Rationale: The slight weakening in MACD momentum and the potential for resistance at 1.3100 suggest a possible short-term pullback or consolidation. A rejection at 1.3100 could signal a short-term reversal.

📝 TAOTD Summary

• Current Position: The price is in a strong uptrend, testing the psychological resistance at 1.31000. The bullish momentum is supported by the position above all major EMAs, although the MACD suggests caution as momentum may be weakening.
• Trend: The overall trend is bullish, with the price above the 200-period EMA, confirming long-term strength. The short-term and medium-term trends are also bullish.
• Recent Levels: Near-term support at 1.3077 (10-period EMA) and 1.3042 (20-period EMA), with resistance at 1.31000.
• Momentum: The MACD indicates ongoing bullish momentum, though it may be weakening slightly, suggesting the possibility of a short-term pullback.

This market structure suggests that GBP/USD is in a strong bullish phase.

The alignment of all technical factors (price action, moving averages, momentum indicators) supports this bullish view.

The price is above all major EMAs, and the price itself has been making a series of higher highs and higher lows.

The lack of significant retracements and the acceleration of the uptrend recently indicate that buyers are in firm control. The MACD confirms the bullish momentum.

While the current trend is clearly bullish, the steepness of the recent move indicates that a pullback or consolidation could occur soon.

You should monitor how price reacts to the psychological 1.3100 resistance level above, and the 1.3000 psychological support level below.

Price reclaiming and holding 1.3100 could lead to further gains, while a fall below 1.3000 might signal the start of a more significant correction.

🔑 The key will be whether GBP/USD can maintain its pattern of higher lows in any pullback, and whether it can break above the recent high to continue the uptrend.

Be cautious of potential volatility from Jackson Hole news and watch for signs of exhaustion or potential reversal patterns, given the extent of the recent rally.