FMFX

Cable Sets Up Into UK GDP

Last month UK retail sales dipped to its lowest levels in over a year. And the market barely reacted, registering a low of 1.5838 before heading back higher to 1.6000. We have since had higher lows while maintaining resistance at 1.6010. The result has been an ascending triangle on the hourly chart. Though this is a bullish signal, bulls should be careful heading into tomorrow’s GDP release which is expected to be dovish.

If the pattern of higher lows breaks, watch the orange bid zone between 1.5865 - 1.5833. A breakdown below 1.5830 targets 1.58, the 100-day SMA and the 38.2 Fibonacci retracement level. A breakout above the 1.6059 high targets the top of the blue offer zone at 1.6100 level. Above there, bulls target 1.6250.

UK GDP is released Tuesday at 9:30GMT (4:30AM PST). Traders will look to see if GDP follows retail sales lower. But bears shouldn’t get too excited if last week’s muted market reaction to lower retail sales was any indication. Watch the levels on the charts and trade what you see.