GBP/USD Daily chart is a little puzzle for me and that's why I'm challenged to rationalize the current price action.
The Pound has spent last 3.5 months in roughly the 1.61 - 1.67 range with a down overshoot to 1.58 In June and Up-Overshoot to 1.70 in Aug.
So this makes a balanced price distribution in a 600-pip range (1.61 - 1.67) with 2 equal overshoots which also equal 1/2 of the middle range (300 pips: 1.58-1.61 & 1.67-1.70). NOTE: Here is a rough range figures and this is an attempt to analyze the distribution of the price within the ranges which I'm just experimenting with.
So right now we are standing at a pivotal area defined by the 21-Day MVA at 1.6416.
So Since today we have a small inside, tight range day - that means tomorrow we either accelerate or retrace and resume uptrend. I can see these 2 scenarios:
1. Bearish case: - the 21 / 55 Day MVA Dead Cross - 09/11 was a Grave stone Doji + Rejection off the Upper range area + confirmed by 2 consecutive down days. - trigger for an acceleration will be a breach and close below the 55 DMA/1.6450 & 21 DMA/1.6416
2. Bullish case - since Start of September we are in a sequence of higher highs / lows - the last 3 down days actually made a neat 50% retracement of the 1.6114 - 1.6740 move (50%=1.6426) - today's Low is higher than yesterday's and above the 21-DMA - rising 89-DMA at 1.6349 - held the downtrend and the reversal in the start of this month - now it runs above the 09/07-08 Lows at 1.6321/25 ...................................... However I feel again like I'm trying to pick a side instead of objectively analyzing the chart. One clue to the puzzle might be the outright break above the 200-DMA in EUR/GBP which promises relative weakness in GBP compared to EUR.
this means if EUR/USD now pauses at 1.4735 and retraces - then the GBP/USD will have an even steeper decline. However if Euro accelerates thru resistance the pound will also surge but lagging. On Crosses GBP/CHF is lingering right at the 200-DMA and GBP/JPY is developing today a big Doji pivoting around the Sept 01/02 Lows which might be good for a bounce.