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Talking Points:
- GBP/USD Technical Strategy: Long Setup Invalidated
- GBP/USD prints a Doji for a second consecutive indecision candlestick after Friday’s Spinning Top.
- UK CPI on Tuesday could provide near-term direction in the Sterling
The British Pound followed up last week’s strong performance with a vast amount of indecision throughout the trading day. The Monday open saw price remain supported above the 1.5410 support level early in the session, only to yield to persistent selling as weakness in Asia created risk-aversion throughout many FX markets. The low of today invalidated the higher-low support identified last week, and the long setup has been invalidated as support did not hold.
Moving forward, GBP/USD could carry both bullish and bearish connotations: The Bearish setup highlights three consecutive days of resistance in the 1.5468 zone, which also coincides with the 34-day Exponential Moving Average. The Bullish setup would look to the prior swing-low, offering support on Wednesday and Thursday of last week at the 50% Fibonacci retracement of the ‘secondary move’ (Financial Collapse low of 1.35006 to the 2014 high).
The likely determinant of near-term direction in the pair will be Inflation numbers for the UK released on Tuesday morning. This has been a major push-point for the Sterling, as the Bank of England has cooled their dovish tone, and commentary from Ms. Kristin Forbes on Friday of last week gave the appearance that the bank may be looking to hike ‘sooner rather than later.’
Near-term, breaks of 1.5500 should be construed bullishly, while continued resistance in the neighborhood of 1.5465 could be construed bearishly.
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
