The price chart of the GBP/USD currency pair showed a price plunge in the early trade yesterday. What actually happened?
Analysts see the decline in prices as driven by the strengthening of the US dollar which took advantage of the positive impact on the release of the US NFP employment data report last Friday.
A good reading of the report slightly reduced the pressure for the Federal Reserve (Fed) to slow down policy, but instead opened up room for policy tightening to bring inflation down to the target level.
Thus, the Pound had to resist the pressure of the US dollar for now, but it is not impossible that the situation could change at any time.
If you look at the GBP/USD chart, the price went down to the 1.24000 level in the Asian session, but bounced 40 pips to the 1.24400 level in the European session and tested the Moving Average 50 (MA50) barrier level on the 1-hour time frame.
After failing to continue climbing higher, price plunges were displayed in the New York session until the price reached around 1.23500.
However, at the close of the session, the price was seen to bounce back and the increase continued in the Asian session on Tuesday morning towards the level of 1.24000.
The MA50 barrier is also tested while the price reaction is observed by investors for the next movement indication in the following sessions.
If the price goes back down again, the level hit on yesterday's decline is likely to be overcome before the price heads to the support zone at 1.23000.
A lower decrease is also seen in the RBS zone (resistance becomes support) which was previously focused at 1.22000.
However, if the rally continues higher today, the resistance zone at 1.25000 is likely to be retested.
Passing the resistance will record the price's latest high level with the target shifting at a height of around 1.26000.
