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Hello, dear traders!
Before we start analyzing GBP/USD, I'd like to discuss new tensions between the European Union and the United Kingdom. The parties have disagreed on the issue of checks on the border between Northern Ireland and Ireland that is part of the EU. Notably, the British authorities consider the conflict to be temporary, saying that the country is still trying to adjust to the new trade regulations. It seems that the UK government is testing the EU authorities in order to see how they will act under such conditions. As for COVID-19, the UK's vaccination programme is working far better than in the EU. Surely this fact provides support for the pound sterling. Now, let's take a look at the charts.
Daily chart
If EUR/USD settled lower, then GBP/USD formed a Doji candlestick at the end of yesterday's trading. In fact, the Doji candlestick has almost no body. This fact indicates a serious confrontation between bulls and bears. Thus, bulls have failed to break through a strong psychological and technical level of 1.4000. Yesterday, the price reached only 1.4004, rebounded from it, and closed at 1.3950. In fact, a breakout at 1.4000 will not be enough for the pair to extend the rally. Only a breakout of the red Kijun-sen at 1.4044 will allow the pair to test a strong resistance level set at 1.4231. Meanwhile, bears should break through both the blue Kijun-sen and a strong support level of 1.3857. Only consolidation below support can show whether the quote will go down or not.
H4 chart
Let's take a look at GBP/USD on the H4 chart. The pound is fond of false breakouts and long-term monitoring of the currency's dynamics proves that. Given that the exponential moving average (200) is right under the resistance level of 1.3857, buy deals will become possible from the price range of 1.3860-1.3835 after a false breakout at 1.3857 and the formation of a reversal candlestick pattern on this or another chart. One should consider selling GBP/USD from the 1.4000-1.4015 price range. Above it there is MA(50), which is likely to strengthen resistance in this important area. Once there are bearish candlestick patterns there, we will be able to sell the pair. Given that the US labor market report will be published tomorrow, do not rush to set high targets. Market sentiment as well as the price can change any moment.
Have a nice trading day!
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