#GBPUSD: Flurry of Strong Buying Producing Test of New Range|It Declines from 5-Month High, But Outlook is Sill Bullish (6 December 2022)

GBPUSD Declines from 5-Month High, But Outlook is Sill Bullish

GBPUSD retreated from the fresh five-month high of 1.2343 that was posted on Monday, returning back near the previous support at 1.2160 around the 200-day simple moving average (SMA). In the short-term the bias turned bullish, and more increases may switch the broader outlook to positive as well.

Turning to the medium-term picture, the pair switched to positive mode after the rally above the 200-day SMA. Any moves beneath the SMAs and the uptrend line may open the door for the bears to take the upper hand again.

The dynamic buying of the GBP/USD over the past week and in reality the past two months may be resulting in a short-term test of its higher range.

The GBP/USD is near the 1.21900 mark as of this writing with typical fast price action being displayed. Traders who have grown accustomed to the rocket ride upward in the GBP/USD the past couple of months may be impatient if they are waiting on another climb higher from the currency pair. A bit more than two months ago, the GBP/USD was trading near the 1.05000 mark during the last week of September.

The ability of the GBP/USD to reverse higher has been noteworthy, but not unexpected by some financial houses which felt the currency pair had been oversold. The dynamic price action in the GBP/USD has been the result of messy U.K politics, economic concerns in the U.K and U.S, and mixed rhetoric from the U.S Federal Reserve.

Behavioral Sentiment has Generated Power in the GBP/USD

Technical traders may not want to hear it, but behavioral sentiment via the complex puzzle described above caused the GBP/USD to stumble hard. However, it also gave the GBP/USD the ability to regain its very British-like ‘composure’ and gain once again.

The climb back above the 1.20000 ratio has been important. Now traders need to perhaps get used to the notion the GBP/USD is about to return to a tranquil trading range in which smaller trends occur, instead of the monster-sized moves seen the past four months which have seen the GBP/USD act more like a ‘developing nations’ Forex pair.

Short-Term Higher GBP/USD Price Range may become Durable

• Having touched a high near 1.23430 yesterday which had been last seen in the middle of June, the GBP/USD has run into some headwinds and sold slightly.
• The fast movements of the GBP/USD may remain for a little longer, but it is also possible and likely the currency pair will start to stabilize and initiate a more polite price range.

Traders who want to continue to pursue buying opportunities within the GBP/USD may want to wait for a test of perceived support levels. If the 1.21800 mark is challenged and proves to be rather durable, this may be a reasonable place to ignite buying positions that seek targets above.

Having produced fast price action the past couple of months, traders should know that risk management is essential, but they should also start to accept the dynamic action of the GBP/USD may lessen. This means traders should not be overly ambitious regarding their targets and have realistic take-profit goals when they wager on the direction of the GBP/USD.

GBP/USD Short-Term Outlook:

Current Resistance: 1.22250

Current Support: 1.21790

High Target: 1.22990

Low Target: 1.21610

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