Bernanke killed the US dollar yesterday. UK GDP met expectations of minimal growth but growth nonetheless when most market participants, myself included, were expecting a contraction. US GDP was less than expected. All this has built a nice fundametal case for cable bulls. And the charts support.
Today’s session sees a nice correction in the $GBPUSD which is fully expected and healthy when a pair rallies 250 pips in 1 day. So far the 50% Fibonacci level has held up as nice support. Cable remains bullish above 1.6592. And I have more confidence in GBP bulls than USD bulls for several reasons:
- The pair made 3 attempts to break below 1.6500 and each time was met with bids at 1.6430, the previous resistance level now turned support.
- On this latest wave to the upside, 1.6500 held as support.
- The fundamentals have deteriorated for the USD. The Federal Reserve welcomes a weak dollar to support the economy and with inflation still relatively subdued in the United States, the $FED is in no hurry to tighten monetary policy. Today’s US GDP report indicates further that the economy still needs support in the eyes of the Federal Reserve.
- The market expects an interest rate hike from the Bank of England much sooner than from the Federal Reserve.
Bulls target 1.6750 for a break above while bears target a move back to 1.6500. Trade what you see.