GBP/USD Pulls Back to Keep RSI Out of Overbought Zone

British Pound Outlook: GBP/USD

GBP/USD pulls back from a fresh yearly high (1.3207) to keep the Relative Strength Index (RSI) out of overbought territory, but the recent weakness in the exchange rate may turn out to be temporary as the ascending channel from earlier this year remains intact.

GBP/USD Pulls Back to Keep RSI Out of Overbought Zone

Keep in mind, GBP/USD cleared the November high (1.3048) as it briefly pushed above channel resistance, and the exchange rate may attempt to further trace the decline the October high (1.3390) as it appears to be tracking the positive slope in the 50-Day SMA (1.2730).

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However, GBP/USD may struggle to retain the advance from the monthly low (1.2879) as it snaps the series of higher highs and lows from earlier this week, and the RSI may show the bullish momentum abating amid the failed attempt to push above 70.

With that said, GBP/USD may consolidate over the coming days as it marks the largest single-day decline since November, but the exchange rate may continue to trade to fresh yearly highs as it still trades within the descending channel from earlier this year.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView

• GBP/USD holds below channel resistance as it halts a three-day rally, and a close below 1.3010 (61.8% Fibonacci extension) may push the exchange rate back towards the 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension) region.
• Failure to defend the monthly low (1.2879) may lead to a test of 1.2820 (38.2% Fibonacci extension), but the pullback in GBP/USD may continue to track the positive slope in the 50-Day SMA (1.2730) as it still holds above the moving average.
• Need a move/close above the 1.3110 (23.6% Fibonacci retracement) to 1.3150 (23.6% Fibonacci extension) to bring 1.3210 (50% Fibonacci extension) back on the radar, with a break/close above 1.3310 (100% Fibonacci extension) opening up the October high (1.3390).

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--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong