Technical outlook:
GBPUSD has surprised traders after breaking below the 1.2150 mark on Monday. The slide continues further as bears register fresh swing lows around the 1.2080 mark early at the opening of the New York session on Tuesday. We expect strong support to come in around the 1.2040 level going forward as bulls prepare to be back in control.
GBPUSD is now facing initial resistance at the 1.2665 mark, and a break higher is required to confirm that a bottom is in place. On the other side, initial support will be seen around 1.2040, which is the Fibonacci 0.786 retracement of the earlier larger degree upswing between 1.1400 and 1.4250. The entire boundary is not seen on the presented daily chart though.
Furthermore, the drop in price toward the 1.2080 mark has been accompanied by a strong bullish divergence on the daily RSI as depicted on the chart here. It could be a potential trend reversal signal as the downside remains limited from here. Aggressive traders might be inclined to initiate fresh long positions against the 1.1800 mark.
Trading plan:
Potential rally through 1.2665 against 1.1800
Good luck!
