(Adds tags)
Jan 29 (Reuters) - Sterling has been in a downward spiral since October 2024 with little sign of a recovery. However, the monthly GBP/USD chart shows the key October 2023 1.2039 low is intact and coupled with a monthly candle signal, warn of a potential reversal. Fundamental factors have weighed on the pound in recent months and a four-month bear trend has breached key technical levels en-route to the January 1 low of 1.2100, a near 10% depreciation.
The 100- and 10-day moving averages gave way at 1.2914 and 1.2813, respectively. This month has seen a drop below the daily Ichimoku kijun line at 1.2620. The daily cloud top at 1.2288 was also broken.
A sterling recovery to 1.2523 on Jan. 27 has, however, given potential for a monthly reversal signal. A hammer candlestick, a bullish warning, has formed and, if GBP/USD closes the month above the 1.2288 cloud top, there could be scope for further gains during February.
A hammer forms when the market has sold off sharply but ends the period near the highs, leaving a long lower shadow. For a hammer to have significance there needs to be a preceding falling trend.
Sterling remains under pressure and the short-term picture
could show further weakness, but the longer-term charts could
hold hope for the pound.
GBP/USD monthly Ichimoku chart:
(Peter Stoneham is a Reuters market analyst. The views expressed
are his own)