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Talking Points:
- GBP/USD Technical Strategy: Flat
- GBP/USD working on a higher-low after throttling higher throughout the week.
- Fibonacci support combined with a higher-low highlights a potential long position should the market retain support on Monday.
British Pound strength put in a strong week of price action against the US Dollar, and with additional potential weakness in the Greenback the Sterling could become one of the more attractive currencies in the world to be long of.
After a strong bounce of off the 23.6% retracement (of the July 2014-April 2015 move) to end last week, the Cable gapped higher and never filled as prices continued moving in the top-side direction. Multiple resistance levels yielded to a surging British Pound and the 1.5410 level became particularly interesting.
This is the 61.8% retracement of the most recent major move (four-month-low to four-month-high – indicated by gray-dashed lines on the chart). This level put in resistance on Tuesday, only to be broken after the Bank of England rate announcement, and has now become new support.
This could be encouraging for potential long positions, especially given the veracity with which the US Dollar has sold off, and the dearth of available option to look to sell Dollar’s should a more passive Fed present itself.
Continued support on this 61.8% Fibonnaci retracement on Monday could prove promising for long positions going into British Inflation on Tuesday. This could offer a higher-low support with a concentrated risk setup should strength in the pair continue play out. On the other hand, an aggressive down-day on Monday could highlight a potential evening star formation on the Daily chart, as today’s ‘spinning top’ formation could be a sign of indecision at the top of this weekly trend.
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
