Darvas Box favors volatility expansion above 1.2600

  • Overlapping of the 200-EMA with the cable price adds to the consolidation filters.
  • The Darvas Box formation is hitting for an extreme squeeze in volatility.
  • A 40.00-60.00 range by the RSI (14) is indicating the unavailability of momentum in the counter.

The GBP/USD pair is oscillating in a narrow range of 1.2530-1.2550 in Tokyo. On Wednesday, the cable will witness a responsive selling action after attempting to overstep the critical hurdle of 1.2600. A balanced market profile is indicating a consolidative move ahead.

The formation of a Darvas Box chart pattern on an hourly scale is indicating a squeeze in the standard deviation. The asset is trading back and forth in a range of 1.2430-1.2600 for the past two weeks. Usually, a Darvas box formation after a vertical upside move dictates the presence of initiative buyers, which holds the potential of driving the asset higher.

The 200-period Exponential Moving Average (EMA) at 1.2544 is overlapping with the cable price, which firms the odds of consolidation ahead.

Also, the Relative Strength Index (RSI) (14) in the 40.00-60.00 range is hoping for a continuation of a lackluster performance.

An upside break of the Darvas Box above weekly highs at 1.2600 will send the asset towards May’s high and the round-level resistance at 1.2667 and 1.2700 respectively.

On the contrary, the pound bulls could lose their grip if the asset drops below Tuesday’s low at 1.2430. This will drag the major towards May 11 high at 1.2400 followed by May 18 low at 1.2280.

GBP/USD hourly chart


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