On the 1-hour chart, GBP/USD is forming higher highs and lowers after falling to a two-year low at 1.19341. Additionally, the bulls have made gains above the 50 and 200 exponential moving averages. Still, to ensure the uptrend continues, it is imperative for the pair to break through Thursday’s high at 1.24047.
In the short term, the candlestick bodies are getting shorter, implying that the positive momentum is fading, as the buying forces don’t seem strong enough to end on a higher note. In light of this, we shouldn’t be surprised if the price consolidates around the 200-EMA for a while until we get a better indication of market direction. A sustained rally in the pound should lead the price higher from its previous high, resulting in a larger candlestick body. If so, the pair may rise higher to test the resistance level of 1.24047. Assuming price moves above this roadblock for an extended period, the next hurdle would be 1.24700.
Alternatively, suppose price consolidation leads to increased selling pressure. The price may then move back down towards the support at 1.22507, which coincides with the 50-EMA. When this confluence breaks, the short-term uptrend will reverse and more sellers will enter the market, taking the pair to the 1.22061 level.
Momentum oscillators reflect a fading bullish bias. RSI is moving away from the buy region towards the neutral zone, suggesting that the buyers are giving up. Further, the momentum is moving away from its recent high, pointing towards the 100 threshold. Similarly, the MACD bars are declining into positive territory below the descending signal line.