GBP/USD Strategy Snap: Short-term Downtrend Holds
- Written by: Gary Howes
Timeframes matter: near-term we're likely going lower, longer-term it's still higher.
The pound is softer against the dollar through midweek and into Thursday, confirming a broader short-term downtrend is intact.
A rebound towards the 21-day moving average (MA) at 1.35 was our base-case at the start of the week, and that call duly played out.
We also said the rally would be brief as the broader backdrop remains conducive to USD strength, and that's proving correct as the rise to the 21-day MA falters and a pullback ensues.
Stepping back, we can see the 21-day MA also coincides with a downsloping trend channel:
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The takeaway at this juncture is that downside is intact and an eventual break below support at 1.3356 is now possible, a line of support that runs back to December.
Note that the pound-dollar pair has not closed below here since December 09.
Below here, 1.3253 comes into play.
To be clear, when we say 'trending lower', we refer to a multi-day and short-term timeframe spanning a number of weeks, because on a multi-month timeframe, we are still looking at a longer-term rally.
The implications are that further weakness is possible in the coming days and a few weeks, ahead of a potential resumption of the longer-term rally.
