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MNI MARKETS ANALYSIS: GBPUSD Trendline Break Reinforces Bullish Sentiment

Towards the end of last year we highlighted a key trendline resistance in GBPUSD. This trendline, drawn off the 2007 high, had remained intact until December where it was breached following a move above 1.3372. A strong monthly close in December reinforced the bullish breakout and so far this year, price has remained above the trendline - it currently intersects at 1.3322. These developments highlight a reversal of the downtrend that has been in place since the Nov 2007 highs.

With a bullish price structure in place, attention turns to the 1.4000 handle and more importantly resistance at 1.4377, the April 2018 highs. A break of 1.4377 would strengthen a medium-term bullish case and signal scope for an extension of the current 10-month rally that started off the Mar 2020 low. This would pave the way for strength towards 1.5136, the 38.2% retracement of the 2007-20 downtrend.

Additional technical developments that support the likelihood of Cable appreciating are: The USD is in a medium-term downtrend and general USD weakness suggests Cable is likely to remain firm. On both the weekly and daily frequencies, a clear bullish price sequence of higher highs and higher lows. Is evident. Daily moving average studies are in a bull mode.

Looking at the monthly chart, initial firm support lies at 1.3322, the former trendline resistance. In February, the trendline reference will be 1.3273. A return below the trendline would represent a concern for bulls. A bearish monthly close below the trendline would suggest the December break is potentially a false one. Key support though is at 1.2676, the Sep 30 low. Support levels to watch ahead of 1.2676 are:
SUP 1: 1.3452 Jan 11 low
SUP 2: 1.3135 Dec 11 low, 2020
SUP 3: 1.2855 Nov 2 low, 2020

To conclude, trend conditions in Cable are bullish. The recent trendline break highlights an important shift in sentiment. Furthermore, the trendline continues to play a key role in assessing recent developments.

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