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Abstract: The GBPUSD is trading slightly above the upper limit of the downside regression channel, with the Relative Strength Index holding near 50 in the 4H timeframe at neutral levels.

Fundamentals

The GBPUSD found good support in the past week's decline, but the increase was limited to below 1.2800. Broadly speaking, the GBP still looks relatively "cheap", and the risk of the Bank of England (BOE) extending the policy tightening cycle still exists. The GBP should be well supported in the face of further decline.

The GBPUSD still failed to gain momentum on Wednesday. Today, the market is adjusting to the pressure line of 1.2780, and then it goes down again. Once the correction is completed, the price may rebound. In the short term, there may be another decline structure in the market to 1.2650, but it will not go further on this basis.

The GBPUSD closed above the 50H SMA yesterday. Currently facing resistance near the 1.2780 area, the next upward resistance level is near the range of 1.2800. If it breaks through 1.2800 obviously, the GBPUSD may rise to 1.2840 in a short time.

The next key resistance is near the level of 1.2880, above which the GBPUSD may gain bullish momentum and return to the range of 1.2950.

On the downside, the first main support is near the 1.2720 range, below which the GBPUSD may fall to 1.2650. The bears' next stop may be around 1.2620.

Technical Analysis

The GBPUSD closed above its 50-day SMA and the resistance trendline from October 2022 on Tuesday, suggesting that more positive trading opportunities could emerge.

Moreover, after the reversed Doji Star at the bottom of the bearish channel on August 3, which pushed the price towards the upper boundary of the uptrend channel at 1.2800, both the 20-day SMA and the breached May uptrend line are also within trading distance at 1.2880 and 1.2925, respectively; and in the 1W timeframe, the restrictive 200-period SMA is located in the same area. Therefore, investors may need to wait for a close above 1.2800 before pushing the price toward the threshold of 1.2887 or even higher to 1.2925.

However, the RSI and MACD conflict with the bullish scenario as they are both in a downtrend and a bearish zone. On the other hand, the stochastic indicator has bottomed out in the oversold zone and is rising again. These signals are similar to those of May when the GBPUSD finally rallied significantly to 1.2847. Therefore, some patience may be needed in the upcoming trading session.

However, if selling pressure resurfaces below the key support trendline at 1.2720, the price could seek shelter between 1.2650 and 1.2620. A further move lower and below the 1.2591 level would invalidate the rebound trend.

Overall, the GBPUSD is showing mixed signals in the short term. A pullback below 1.2720 could dampen market sentiment, but at the same time, it is a buy signal and a very good test of stop-loss settings. However, we still believe that the situation will improve. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 1.2675

Target price: 1.2980

Stop loss: 1.2590

Deadline: 2023-08-23 23:55:00

Support: 1.2650, 1.2620, 1.2591

Resistance: 1.2756, 1.2790, 1.2820