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GBPUSD – Possible Morning Star on Key Support

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Cable is potentially looking quite bullish again after consolidating over the last week. The pair found support around 1.5530 from the 55 and 233-day simple moving averages and the 38.2 fib level – 8 July lows to 15 July highs – and now appears to be pushing on again.

gbpusd daily

If today’s candle closes above 1.5589, or around this level, it would create a morning star formation – very bullish setup – on a key support level. Of course, it should be noted that these formations are always stronger when the first and last candles are larger.

While the moving averages haven’t been great levels of support and resistance recently, they generally tend to be less effective during periods of consolidation, which we have seen as of late.

That said, the 55-day SMA has now crossed above the 233-day SMA which is a bullish signal and could trigger the next leg higher. Also, in recent sessions the two have offered strong support for the pair.

If the pair fails to hold above this support, further support could be found below around 1.55 – the 50% retracement of the above move.

gbpusd 4hr

A signal that this support may give way could come from the failure and the morning star to form on the daily while an evening star forms on the 4-hour. And a more convincing one at that with the first and last candles being larger.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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