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[Technical analysis] The slippery road for the British pound

GBPUSD Tech analysis by Simon Kazinsky on 06:00 September 27, 2019 EST

The pound has enjoyed a short term recovery but it is, by no means, out of the woods.

Since the beginning of August, almost two months now, the pound has managed a recovery from below 1.19 being able to climb to 1.26 against the "strong" dollar. That's almost a 6% gain in the period.

However, if we zoom out a bit and take a look at longer time frames we can see that the magnitude of this otherwise very respectable strength in such limited time is a drop in the ocean against the backdrop of the prevailing downtrend.

In fact, none of the important resistances (1.29 and 1.32) in the weekly chart has even been challenged and the troubled sterling leaves a reversal candle for the last week of September.

With all this in mind the most likely move in the mid term is down and parity is becoming more likely.

Meanwhile, as you would expect, retail traders are heavily betting on them spotting the bottom of this 10 years old trend and 7 out of 10 of them are long the pair. This is a good contrarian indicator that reinforces the bearish view.