- GBP/USD has backed off from 19-month highs hit in early Asia.
- The RSI is flashing the strongest overbought reading in nearly two years.
- The indicator can stay overbought for prolonged period in a strong trending market.
GBP/USD is currently trading at 1.3457, having hit a 19-month high of 1.3515 in early Asia due to the UK election exit polls predicting a big win for the incumbent Prime Minister Boris Johnson.
The pair’s 14-day relative strength index (RSI) is now hovering at 80.47, the highest level since January 2018. An above 70-reading indicates overbought conditions.
So, it seems safe to say that the pair is most overbought in nearly two years.
An overbought reading on the RSI does not imply bearish reversal. It merely indicates the rally has gone too far and a pause could be in the offing.
Also, in a strong trending market, indicators can stay overbought longer than sellers can stay solvent.
That said, the GBP/USD pair has rallied by nearly 1300 pips in the last two months and seems to have priced in Johnson’s victory.
So, a “sell the fact” pullback in GBP could be seen once the official results confirm victory for Johnson’s Conservative party.
Daily chart
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Trend: Overbought
Technical levels
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