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GBPUSD is bouncing from a major resistance

One of the best setups at the beginning of the week can be found on GBPUSD. The pair is on the back foot, and the main reasons for that, from the fundamental standpoint, are the weaker PMI number and the new comments from Mr. Barnier regarding Brexit. This comes in line with the technical analysis, which was giving us a sell signal as early as on Friday.

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As you can see, at the end of last week, cable bounced from a combination of two important resistances. The first was the horizontal resistance, which played an important role in the November 2017 and June/July 2018 (red, 1.303). The second was the downwards trend line, which has connected the lower highs since May (blue). In addition to that, the recent bullish correction was shaped like a flag, which is promoting a further drop. Today, the price is breaking the lower line of the flag and the short-term horizontal support at 1.293 (green). That is a legitimate signal to go short.

The negative signal is on, as long as the price is below the red area. The chances are very low that we will come back above. With this setup and the current momentum, the price should soon reach new mid-term lows.



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