Inside candle favors a pullback, 1.1000 a key hurdle

• Inside candle formation has bolstered the odds of a pullback move.
• Declining 10-and-20-EMAs still favor a downside bias.
• The RSI (14) is displaying signs of an oversold situation that could trigger a pullback.

The GBP/USD pair has turned sideways after a strong rebound from a fresh multi-decade low of 1.3565 on Monday. The cable is displaying back-and-forth moves in a range of 1.0661-1.0832 and is displaying a volatility contraction phase. This could result in a further decline in the asset as institutional investors might be distributing more inventories.

On the daily scale, the formation of an Inside candlestick pattern has cleared and the downside momentum has paused for a while. The above-mentioned candlestick formation indicates a volatility contraction amid exhaustion on the downside. A pullback move will get strengthened if the cable manages to overstep Monday’s high at 1.0931. The downward sloping trendline placed from June 14 low at 1.1934 will act as a major barricade for the counter.

Meanwhile, the declining 10-and 20-period Exponential Moving Averages (EMAs) at 1.1040 and 1.1267 respectively favor more weakness.

However, the Relative Strength Index (RSI) (14) is oscillating in an oversold territory around 17.00, which indicates that a pullback move cannot be ruled out. Even for a further downside, the momentum oscillator needs to cool down for once.

A break above Monday’s high at 1.0931 will activate the Inside Candle formation and will send the cable towards the round-level resistance at 1.1000, followed by 10-EMA at 1.1120.

On the flip side, the cable will lose significance further if drops below Monday’s low at 1.0339, which will drag the asset towards the round-level support at 1.0200. A slippage below the latter will direct the cable towards parity.

GBP/USD daily chart