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After battling at 1.2700, the GBP/USD pair drops as a result of the strong US dollar and poor US housing data. The technical picture is gloomy, with a “evening star” pattern and an RSI pointing to more decline.
The 50-DMA at 1.2636, the 200-DMA at 1.2555, and the 1.2600 are important support levels. In order to indicate a positive turn around, GBP/USD must rise over 1.2700 and overcome resistance at 1.2730/40.
Following the release of US housing data on Wednesday, which illustrates the deterioration in the sector, the pound sterling lost ground against the greenback. However, the US Dollar Index (DXY) indicates that the dollar is currently trading at almost eight-week highs. At 1.2642, the GBP/USD exchange rate is down 0.34%.
The pair created a “bullish piercing” pattern on Tuesday, suggesting that traders may test the next resistance level around 1.2700, although buyers are still hesitant to push the GBP/USD higher towards that level.
The GBP/USD pair failed to break above Tuesday’s low of 1.2670 and made a new weekly low of 1.2627 as a “evening star” pattern formed on a three-candlestick chart.
Momentum supports sellers, as shown by the Relative Strength Index (RSI), which remains bearish and aims lower.
Therefore, the GBP/USD path of least resistance is downwards. It will face the next support level at the 50-DMA at 1.2636. Once that area is surpassed, the psychological 1.2600 mark will follow, ahead of the 200-DMA at 1.2555.
For a bullish continuation, traders must claim 1.2700 and clear a previous support trendline turned resistance at around 1.2730/40.
