Traders had to admit that another weekly close above 1.6000, despite the breakdown to 1.5770 midterm support, was bullish. However the failure at 1.62 hinted that bears were still around. The failure at 1.6150 became an early confirmation that shorts were indeed on the right side of the trade.
Today’s break of 1.6050 was key. Today’s hold above 1.6000 is natural reaction to the major psychological level. So a bounce could happen back towards 1.6100. At this level, we watch if new shorts will show themselves for the bigger move towards 1.5750. 1.5950 is the first level of support to contend with. We’ve seen plenty of action there last week making this the week’s target to the downside. Momentum goes to the one who can break and hold. Bullish above, bearish below. News this week can rock this either way but today’s Monday action has yielded nicely for last week’s bears.
1.5950 is key to the downside going into Tuesday’s Bank of England meeting minutes release. The market is obviously biased bearish on the BoE considering the trend of the last 6 months. With FOMC out of the way, traders are free to put their attention back on the inaction of the BoE. Trade what you see.
If price can hold below 0.8720, the first target is 0.8670. The real test for bears will be 0.8600, the 61.8% Fibonacci level of the entire 2011 EURGBP rally. Watch price action going into the week.
The USD has weakened significantly as the Federal Reserve talks down the USD and the market rumors about QE3 (a third round of quantitative easing in the United States) gather steam. After making a low at 1.5770, GBPUSD has actually been bullish.
Another bounce off of the 1.5750 midterm support level
A close above the 61.8% Fibonacci retracement level at 1.5880 despite breaking below it.
A new high above 1.6150
To confirm the bullishness, a break and hold above the 61.8% Fibonacci retracement level at 1.6185 would be need with price completing the quarter to 1.6250. If this doesn’t develop, we could see corrective action back towards 1.6000, the 61.8% Fibonacci level of today’s rally.
Ultimately, cable looks bullish above 1.6000 despite the bear trend since late April.
GBPUSD rallied to 1.6115 highs in the Asian session only to fall in a vicious sell-off to 1.5980. However, 15980 has become a strong level of support this week, best seen on the hourly (or 5-minute) chart. A bounce off this level targets the top of the consolidation range at 1.6040/50. A break there targets highs again above 1.6100.
If GBPUSD is to continue its bear trend, price will need to break and hold below this 1.5980 level.
As we anticipated 2 weeks ago, GBPUSD has transitioned into a new bearish trend. We were watching for the infamous 1.6000 level to be broken and for price to hold below it. Well, we got both last week as price closed last week BELOW 1.6000 major large quarter point.
While a very bearish event, it is prudent to note that price fell to the 1.5912 lows with very shallow to no correction on its fall from 1.6260 high of last week. That makes this pair ripe for corrective action this week.
Watch the Fibonacci levels on the daily chart. Also, news this week could fuel the correction if UK GDP surprises and comes in not so bad and US manufacturing comes weaker-than-expected. And yet on the other hand news could very well fuel a continuation in the rally as the marke really expects. Trade what you see!
After finding support ahead of the 50% Fibonacci retracement level on the daily chart, cable headed higher as expected in reaction to the Fib level at the start of this trading week. However, the pair failed to make a higher high on the daily chart and couldn’t even regain 1.6500 on its rally.
Now the pair has made new lows at 1.6167 in today’s trading session after breaking last week’s lows at 1.6216. The fundamentals have proven to support this change as UK unemployment came out worse-than-expected while inflation came in lower-than-expected. Therefore it looks as though the BoE was spot on in its inflation reports and corresponding response in monetary policy after all and will have no further incentive to tighten monetary policy in the near future as the market previously expected. In contrast, US inflation ticked higher and if that trend picks up momentum, the market will begin to anticipate a move in tightening monetary policy sooner than expected. That would spell further USD strength in the midst of GBP weakness which could equal a new bear trend in the GBPUSD as we begin to shift into summer trading.
Trade what you see! Intraday and intra-week, price will move up, down, and then up again. But that doesn’t change the fact that long term that the GBPUSD is seemingly moving into a new trend. In the meantime, let’s not get too far ahead of ourselves. 1.6000 is the first major level of support on the daily chart that price needs to break and remain below in order to see this new bear trend really begin to take hold.
After a spike higher during the Asian session, the 50% Fibonacci level has held and the pair is continuing lower into the Asian close. The pair is well set to move lower and make new lows below 1.6422 as expected.
UK manufacturing, net lending, and money supply numbers are due later this morning in the European session. Any upside surprise in the data may upset the current setup. What is more likely, however, is another spike higher that will be met by sellers before the pair moves below 1.6400. 1.6500, now the 61.8% Fibonacci level of yesterday’s price action, has to hold as resistance for this to be true.
Be mindful of news and trade what you see! Downside targets are 1.6393 and 1.6360. If bulls step in in a major way due to news, upside targets are 1.6545 and 1.6640.
The EURGBP made new lows last week at 0.8673 respecting the 0.8670 major short term support level on the daily chart. The pair then bounced out of that level in a corrective rally to 0.8800 ahead of the 38.2% Fibonacci retracement level of the entire breakdown from 0.9040 - 0.8673 at 0.8814.
However, instead of making new lows, the EURGBP made a higher high as the market opened on Sunday at 0.8679. When the pair broke above the 38.2% Fibonacci level (circled above) after the failure at the lows, that was the signal that the pair was headed higher. And in fact it did making a session high today at 0.8670.
Breaking through the 61.8% Fibonacci level, the pair look like it will target 0.8800 and break above to test 0.8810/20. Only a break above shifts focus back to bulls.
A beautiful technical correction on the daily chart has occurred in the GBPUSD currency pair. The level to watch during this correction was the area between the 50% Fibonacci level at 1.6455 and the 61.8% Fibonacci level at 1.6385. If we had a break below 1.6385, it would be safe to say that a reversal in this uptrend was unfolding. A hold, however, would restart the uptrend that should make new highs above 1.6750.
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.
While most of the market is looking ahead to the US FOMC meeting, sterling traders await the UK GDP number which will be released ahead of the Fed announcement. Today’s UK CBI manufacturing number was dismal and indicates to market participants that the British economy may have been weaker than the market expects in the 1st quarter of this year.
After languishing during Monday’s session above 0.8800, the EURGBP broke out after the release of the poor UK CBI numbers as sterling took a hit on the news across the board. This breakout rally made highs at 0.8903 before falling back to the 38.2% Fibonacci retracement level late in the NY session.
If UK GDP is weak, fully expect price to break out and test the 12-month highs at 0.8940. A break above that level sees price complete the quarter to 0.9000, a call I made way back in January. However, if price surprises to the upside, price will retrace this rally back to 0.8850. A break of that level to the downside sees price go to 0.8800.
Remember, trade the market reaction (price action) not the news headline.
The GBPUSD closed last week above 1.6500 indicating that its breakout to 18-month highs at 1.6600 is legitimately bullish.
The GBPUSD daily chart shows the breakout rally had no retracement. Therefore, I do expect the pair to retrace to 1.6400 before heading higher towards 1.6750. Only a daily close above 1.6575 after Monday’s trading session will change this short-term bias. That did not happen today.
Instead, cable dropped below 1.6500. Since the pair managed to hold above this level last week after breaking above it, this was a signal of weakness. This signal panned out as the pair dropped to an intraday low of 1.6466. Though price has sinced bounced back to 1.6500, price remains below the 1.6500 large quarter point signaling that more weakness could be in store for the GBPUSD.
Price targets 1.6450, 1.6430, 1.6380 to the downside and 1.6550, 1.6600, and 1.6625 to the upside.
This week all eyes will be on the FOMC. On Wednesday we will hear from the Federal Reserve as they will announce their decision on interest rates and US monetary policy. On the same day, we will get UK Q1 GDP and consumer confidence. Thursday is US GDP. The market will compare the health of both economics and we should see it played out in price. If the FOMC and US GDP are both optimistic or hawkish, expect further declines to be supported into 1.6380. However, if the Fed disappoints or UK GDP surprises to the upside, price will return to the 1.6600 highs.
Yesterday, Finnish elections and Greece soured the euro and supported the EURGBP’s descent to 0.8750. An expected correction after the failure at the 0.8920 highs, the pair remains bullish as it finds support at 0.8750 and begins to rally off the lows at 0.8740.
The EURGBP pair found support once again at the 61.8% Fibonacci level from the weekly chart at 0.8735. Despite the near-reversal, the pair remains well-supported and in today’s trading session has moved off the 0.8750 lows as it consolidated above 0.8750 at yesterday’s close. The bullish behavior around 0.8750, as price failed to push lower, prompted buyers to step in.
Judging from the hourly chart, the pair has plenty of room to stage a corrective rally to 0.8810. However, I consider a break above 0.8800 a bullish development and would expect a close above the whole number to prompt further gains toward previous resistance at 0.8840/50.
After a blank economic calendar from the UK, the market looks ahead to the release of the Bank of England (BoE) meeting minutes tomorrow. If there are no hawkish clues, the market will be very disappointed and could help send the pair past 0.8850 and back to the 0.8920 highs. On the other hand, any hints of more hawks in the BoE beyond the expected 3 (Sentence, Weale, and Dale) and the EURGBP could find itself below 0.8750 to challenge the lows at 0.8720.
