Recent Price Action
The British pound has slumped against many of the major forex pairs as the threat of the UK leaving the European Union without a deal has only increased with every passing day.
However looking at the price charts of many of the pound pairs, the price does seem to have stabilized around the current levels, and may even be showing signs of bottoming out.
So in this article I thought I would take a closer look at the GBP/USD pair in particular because this has really fallen quite substantially in recent months, and have attempted to identify some key levels that may be worth watching in the coming days and weeks.
Key Levels on Daily Chart
Looking at the daily chart first of all, the price is currently trading a long way below it’s 200-day moving average, so there is plenty of scope for the price to rise and move back towards this key level.
The 200-day EMA currently stands at 1.2731 at the time of writing, but if there is to be an upward breakout, we really need to see the price close above 1.2327 because this is the current level of the Supertrend indicator, which has been indicating a bearish trend since 15 May 2019.
Until that happens, the price is likely to continue trading in a narrow range between 1.20 and 1.22 until the whole Brexit situation is a lot clearer.
Key Levels on Weekly Chart
Moving on to the weekly chart, the price is also a long way below the Supertrend indicator, which has also been bearish since May, and currently stands at 1.2705.
So I think if we are to see a longer-term bullish trend on the GBP/USD the price is going to have to close above this level because this is currently acting as a strong resistance level, and realistically this is unlikely to happen any time soon.
The only likelihood of the GBP/USD closing above 1.2705 on a weekly basis is if there is some kind of agreement in place between the UK and the EU, but as I say, this is highly unlikely at the present time.
Final Thoughts
I think a lot of traders are keen to look for possible long positions on the GBP/USD pair simply because it has fallen so much this year, but it is pointless taking a position based on a dead cat bounce, or speculating that an agreement will be reached.
It is better to either wait for some news regarding a Brexit agreement, or if you do insist on trading, watching some of the key levels mentioned above to see if they are breached.
However my personal view is that it is not worth getting involved with any medium to long-term trades on this or any other British pound pair until after the October 31 deadline, or until an agreement is reached, whichever happens sooner.
I think the GBP may well bounce back in time even if the UK crashes out without a deal, but at the moment the GBP/USD is simply too risky to trade with any real certainty.
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