Cable Reversal Targets Monthly Open Ahead of NFPs, UK Elections
- GBP/USD reversal off support in focus- approaching initial resistance targets
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Technical Outlook:We highlighted this critical slope in cable earlier this month as the pair was approaching resistance with the pullback now responding to support at the December 2016 highs at 1.2775. So was that the extent of the correction? It’s too soon to tell but heading into the close of the month the immediate focus is on resistance into the monthly open at 1.2950 with a breach / close above needed to mark resumption of the broader uptrend. A break of the lows targets initial support at 1.2675-1.27.
Notes: A closer look at price action highlights a near-term descending pitchfork formation extending off May swing highs with the lower parallel catching the Asia lows overnight. A close above 1.2887 would constitute an outside-day reversal off support – implications would be for rally into key near-term resistance at 1.2941/50.
From a trading standpoint, I’ll favor buying weakness on a rally into this region where we’ll look for more definitive price action on either a breakout- or exhaustion pullback- ultimately to get long again. Interim support now 1.2827 with our focus higher while above the weekly open at 1.2805. Added caution is warranted as we head into the monthly close with the US Non-Farm Payrolls report later in the week and the UK elections this weekend likely to fuel increased volatility in the USD & GBP crosses.
- A summary of IG Client Sentiment shows traders are net-short GBPUSD- the ratio stands at -1.38 (42.1% of traders are long)- weak bullish reading
- Retail has remained net-short since April 12- Cable was trading near 1.2485 (3% higher since then)
- Long positions are 0.9% lower than yesterday but 5.2% higher from last week
- Short positions are 2.6% higher than yesterday but 2.8% lower from last week
- While broader sentiment continues to point higher, the recent build in long positions from last week suggests the immediate rebound may be at risk near-term. That said, from at trading standpoint, I’ll still favor fading weakness while above structural support.
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Relevant Data Releases
Other Setups in Play:
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- Kiwi Flies Towards Resistance
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- Crude Oil Prices Target Resistance Ahead of OPEC
- EUR/USD Stretches to Fresh Yearly Highs- Levels to Know From Here
- Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.