- GBP/USD is on the rise, but still short at least 100 pips from confirming a breakout.
- The 4-hour chart indicator is reporting a positive divergence.
GBP/USD has gained over 200 pips in Asia to trade above 1.16 on broad-based US dollar selling.
The 4-hour chart is now reporting a bullish divergence of the relative strength index, which occurs when the indicator prints higher lows, contradicting lower lows on the price chart. It is widely considered an early sign of positive trend reversal.
That said, the indicator would gain credence only if the spot manages to take out the lower high at 1.1793, which is the high of the 4-hour Doji candle created during the US trading hours on Thursday.
At press time, the pair is trading at 1.1650, representing a 1.4% gain on the day.
Acceptance above 1.1793 would confirm a bullish reversal on the 4-hour chart and open the doors to a move above 1.20.
4-hour chart
Trend: Bullish above 1.1793