GBP/USD Technical Analysis: New Up-Trend in the Cable
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- GBP/USD Technical Strategy: Flat
- GBP/USD confirms up-trend after higher-low established earlier in the week.
- The Cable is currently resisting off of prior support trend-line as resistance, but once cleared the pair has room to run.
In our previous piece on Wednesday, we highlighted a new up-trend in the Cable as strong wage growth numbers stoked hopes for inflation in the British economy. And after comments from BOE member Kristin Forbes and Governor Mark Carney indicated that rate hikes may be around-the-corner for the economy, the Sterling has continued to price higher. After the Fed backed off of September rate hikes, this made GBP even more attractive, as this may be one of the few currencies looking at a rate hike in the coming months.
The pair has continued to put in higher-highs, and higher-lows: The price action hallmark of a strong up-trend. But capping the bullishness over the past two days is a projected trend-line, connecting the May low to the July low (shown in purple on the below chart). This is an example of old support becoming new resistance, and this could be a near-term threat to this budding up-trend.
The next level of interest on the pair is at 1.5500, which is a confluent level of psychological support/resistance as well as being a mere nine pips off of the 50% Fibonacci retracement of the most recent major move (taking the May low to the June high). Should price find support in the vicinity of this price, long positions could be attractive with stops below 1.5410 (the 61.8% Fibonacci retracement of the most recent major move), or 1.5345 as wider-risk level (which is the 50% retracement of the ‘secondary’ move from the financial collapse low of 1.3500 to the July 2014 high). Long positions could cast targets at 1.5600 (the 38.2% retracement of the most recent major move and very near to that projected trend-line), and then 1.5730 (23.6% of the most recent major move) and then 1.5750 (‘major psychological level’).
Alternatively, breaks below 1.5500 could open the door for bearish operations, with targets cast towards that 1.5410 level, 1.5345, and then 1.5300.
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