GBPUSD testing major support level, cautious bull wait

After the extended bearish rally in the GBPUSD pair, the bulls have finally emerged in the market near the critical support level at 1.30491. This level has been tested twice and surprisingly this support level managed to push the price higher in both cases. In the daily chart we have nice bullish price action signal near that support level but in the absence of definite bullish reversal signal buying the pair at the current price level will be an immature act.

GBPUSD daily chart analysis

Figure: GBPUSD testing major support level in the daily chart

From the above figure, you can clearly see the price has formed a nice bullish engulfing pattern in the daily chart. Though this setup is very convincing but buying the pair at the current price level with a strong bearish trend in the tail will be extremely risky. If the critical support level at 1.30491 managed to provide solid support the pair will eventually lead towards the next critical resistance level at 1.34560. From that level, we might see some bearish price action but a daily closing of the price above that level will confirm the establishment of the medium-term bullish rally in this pair. On the downside, we need to break below the major support level at 1.30491 to see a further bearish rally.

GBPUSD weekly chart analysis

Figure: GBPUSD bounce off from a critical support level

In the weekly chart, it’s pretty clear the pair facing strong support level. The bears will have to work really hard to clear out the support level at 1.30560. This level is also reinforced with the 50% Fibonacci retracement level. A weekly closing of the price above the red line marked in the weekly chart will create a strong bullish momentum. This will eventually lead this pair towards the next critical resistance level at 1.34511. From this level, we might see some ranging market but a clear break of this level will refuel the cable bulls in the global market.

On the downside, we need to break below the current weekly support level to see a retest of the 61.8% Fibonacci retracement level. Most of the long-term investors will be cautiously looking for bullish price action confirmation signal to execute fresh long orders. But if the bears clear the critical support at 61.8% Fibonacci retracement level, we will see a sharp drop in the GBPUSD pair.

Fundamentally the recent performance of Great Britain is not well in comparison with the U.S economy. So in the starting of the next trading week, we might see some bearish pullback. Those who are looking to buy the pair should consider the strong bearish movement of the pair. However, a slip in the U.S dollar index will significantly help the GBPUSD bulls to rally higher. Considering the technical and fundamental parameters it’s better to look for buying opportunity with a tight stop to reduce the risk factors.