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GBP/USD – Bullish or Bearish; Make the Call

By Greg Holden

One of my favorite currency pairs is the GBP/USD. I've always enjoyed the trading behavior of the Majors for the simple fact that everyone cares more about them. The more exotic pairs can be interesting, but the Majors never let you down. But this past week has put me in a bind regarding this favorite.

So I've decided to hit the "streets" and offer my take, hoping that the analysts among us can pitch in and help make sense of this.

The GBP/USD has two distinct signals completely at odds with one another. On one hand, the daily chart shows the pair trading within a very clear bullish channel, with the current price sitting at a trough within this trend. On the other, we have the weekly chart showing the pair within a clear bearish channel, sitting at a peak within this larger trend.
GBP/USD - Daily Chart

GBP/USD - Weekly Chart

To make matters worse, the MACD/OsMA on both is showing the opposite of what we'd normally expect. On the daily chart, where we'd expect to see bullish signals, we actually have a bearish signal; and vice versa on the weekly chart (see above).

Now, there is plenty of news to support a strengthening of safe-havens like the USD – such as the decline in CB Consumer Confidence figures yesterday and the forecast for a drop in NFP employment figures tomorrow – and there is also some data which supports a weakening GBP, such as declines in the UK housing market and the recent austerity budget.

So the hypothesis I would propose is to get away from these bearish and bullish channel analyses and change our perspective to a different chart formation taking place. On the daily chart we can also see, besides the bullish channel, a rising wedge formation with strong resistance lines roughly at 1.5160 and 1.5510. The signals would make more sense in this regard in that our daily MACD would show that a test of the lower border of the wedge is anticipated, but the weekly chart's bullish signals point us in the direction of thinking that it will fail to breach and continue towards the apex of our wedge.
GBP/USD - Rising Wedge?

What's your take? Should we follow the channel analyses and take a guess at which one is the more relevant? Or do we change focus and attempt a different interpretation of the data available to us?

Disclosure: no positions

Disclosure: no positions