Forex technical analysis: GBPUSD tests resistance area

Trend move higher reaches a pause area

The GBPUSD has shot higher on the back of the BOE more hawkish statement. The pirce has moved above the high from yesterday at 1.3328, making it a new high for the year, and extended to a new high of 1.3371. The pair is trading at the highest level since September 8, 2016 now. The next swing high price from 2016 comes in at 1.34439 (high from September 6th).

Looking at the hourly chart, the pair is testing high trend lines. ""Lines" because the old line was broken yesterday but quickly failed(solid red trend line) The line was reestablished the next hourly bar (red circle 5). That line comes in at 1.3362 currently (and moving higher).

If I were to adjust the trend line to the highest high it comes in higher at around 1.3378 (and moving higher over time - dashed red trend line). The price is currently trading (as I type at 1.3372) between the two trend line levels.

In a trend market you have to protect against the trend continuing. Trends are fast, directional and tend to go farther than you expect. That is why you give the benefit of the doubt to the buyers (even if it seems overbought).

Yes resistance is being tested and traders can lean against the level, but a break should trigger more stops. So be aware. The good news is risk can still be defined and limited against the level.

On a break higher what could be expected?

Looking at the daily chart below, the pair could be on its way to the September 6, 2016 high of 1.34439 (See daily chart below for other upside targets). Other highs from June and July would also be potential targets.

Of note on the daily chart is that the price rise today has breached a topside trend line at 1.3357. That is a level that if the hour resistance holds, will need to be broken (to the downside) in order for the sellers here to get some breathing room and confidence a correction has started. Not being able to get back below would be a clue for the buyers that they remain in full control.