GBP/USD: Hourly Bullish Structure Realigns With Daily But...

The perky Sterling found a steady wave of buying interest on Thursday, which allowed the formation of a daily bullish outside day amid decent tick volume. On the daily, the bullish structure of higher highs and higher lows continues to play out, however, it faces the tough challenge of extending further up amid the bearish daily trend on the UK vs US 10-yr bond yield spread and the bullish daily tendencies in the DXY. This alone should limit the upside in the Sterling.

When drilling down into the hourly, an interesting set of circumstances arise. To start with, the hourly bearish structure has now been violated through a breakout of 1.3020 following the exhaustion of sellers to push beyond 1.2920 in the Asian hours (they failed to extend the magnitude of the previous swing either). The recovery has also come in conjunction with increasing volume as highlighted (bullish). However, right overhead, a wall of orders in the form of Oct 1st POC (Point of Control) is so far preventing further gains, increasing the chances of a potential rotational market to form, especially ahead of the US NFP release.

Judging by the negative cues via the DXY & yield spread, engaging as sellers at the POC appears a sensible low-risk strategy to at least make it far enough to move to breakeven. If the price continues to retrace, be wary of engaging in buy-side action in the middle of the possible range (confirmed on a retest and hold of 1.12920) as the breakout of the structure has been far from commanding. Once the US NFP is out of the way, re-assess the new structure shaping up.

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