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Talking Points:
- GBP/USD Technical Strategy: Flat
- GBP/USD confirms the higher-low established yesterday with a vigorous bounce off of Fibonacci support.
- With headline risk looming, traders should take caution; but should USD-weakness become a prominent theme, GBP/USD will likely be one of the more attractive ways to go short USD.
It’s been a rollercoaster type-of-week for UK data already, and price action in GBP/USD has been moving along with the prints. On Tuesday inflation printed flat and GBP sold off on diminished rate-hike hopes; and on Wednesday, wage growth came in at 2.9% annualized to re-fire those hopes for future inflationary pressure. The Sterling reacted near-immediately to these inflationary indications, selling off on Tuesday to find support on the 50% Fibonacci retracement of the ‘secondary move,’ taking the financial collapse low of 1.3500 to the July 2014 high of 1.7190; only to rocket higher on the back of brisk wage growth printed this morning.
Near-term resistance has come in at 1.5500 on the Cable, which is the 50% retracement of the most recent major move, taking the May low in the pair up the June high (and indicated on the below chart with dashed-gray lines). This is a confluent level of resistance as it’s also a ‘major psychological level’ that will often have a tendency to bring new buyers or sellers into the market. Continued movement above 1.5500 confirms the bullish bias in the pair, and targets could be sought at 1.5567 (38.2% of the tertiary move, taking the high from July of 2014 to the low in April of this year), 1.5600 (confluent resistance as a psychological level is 8 pips away from the 38.2% retracement of the most recent major move), and then 1.5730 (23.6% of the most recent major move).
On the other side of the market, short positions could become attractive with continued resistance showing in the 1.5500 neighborhood. With that type of stance, traders could look for breaks back below the 1.5410 area to highlight the potential for down-trend continuation, at which point 1.5345 (50% of the secondary move), 1.5308 (23.6% of the ‘master move’ of the 2007 high at 2.1160 to the financial collapse low of 1.3500), and then 1.5185 (23.6% of the tertiary move).
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
