GBP/USD weakens below 20-day SMA; next support is 1.2600.
GBP/USD failed several times to jump above the 20-day moving average and the 23.6% Fibonacci retracement level of the downward wave from 1.3380 to 1.2560, near 1.2753, suggesting weak momentum in the daily timeframe.
The negative to a neutral bias in the near term is supported by the deterioration in the momentum indicators. The %K line of the stochastic oscillator has fallen sharply below the overbought zone, while the RSI indicator is flattening in the negative territory.
The 1.2600 psychological level has proven a reliable support level in previous sessions and therefore should be closely watched in case of negative momentum. Even deeper, a significant decline below the five-month low of 1.2560 would open the way towards the 1.2475 area.
On the flipside, immediate resistance to upside movements could emerge around 1.2753 – 1.2760 and a closing price above them could prove more important for the rally to continue. Even higher, a taller wall could be holding around the 38.2% Fibonacci of 1.2870, but the pair needs to first surpass the 40-day SMA – currently at 1.2840.
Concluding, downside risks have somewhat increased in the short-term as the technical indicators are supporting a bearish to a neutral bias, while in the medium-term the bearish outlook remains.
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