Tag: GBPUSD

The $GBPUSD finally broke below psychological support at 1.5000 on the back of QE-induced euro selling. There is a bullish RSI divergence, however, at the lows. This is fueling the rally back to 1.5100 as the new trading week gets underway. However, it is likely to find resistance at the 50% Fibonacci level at 1.5109.

Traders, this week, have their eyes set to the Federal Reserve interest rate decision on Wednesday. It is likely that the $FED does nothing but it will be interesting to hear how Yellen performs during the press conference. Last month, she surprised the markets with her hawkish sentiment and the USD rallied as a result. A USD rally on a hawkish Yellen will manage to push the $GBPUSD to the lows at 1.4950.

However, it is a very different world now. The Swiss National Bank (SNB) has abandoned their currency peg in the $EURCHF, the Bank of Canada has cut interest rates, the Danish National Bank cut interest rates twice in a 1 week, the Central Bank of Nigeria has restricted USD buying versus the naira and the European Central Bank (ECB) has started in on a €1.1 trillion quantitative easing program. These unprecedented and surprise moves by the world’s central banks have likely been in response to the SNB or the ECB or both. So how will the $FED respond? The US central bank is not likely to enact monetary policy based on what others are doing or not doing. With Yellen hawkish but the rest of the FOMC fairly dovish along with the rest of the world, Wednesday will be a very interesting trading day and will likely dictate direction in the USD for the following trading sessions.

Given the chart, any rally in the $GBPUSD on a weakening USD seems well contained by the Fibonacci levels and the former support-turned-resistance zone. Trade what you see.

Happy new year! And it certainly has been a good one so far for GBP bears. On the last trading day of 2014 (December 31) and the 1st trading day of 2015 (January 2), the $GBPUSD completely broke down. Economic data out of the United Kingdom has done a complete turnaround from the economic data of 2013. Friday’s manufacturing data missed and sterling broke support nearly across the board. The weakness continued this week with a miss in both construction and services PMI. Both releases are sending sterling lower still against every major currency.

Until Friday’s breakdown, the limited downside was very restricted by the bullish diverging RSI that had been developing since September. But price didn’t care at all about the diminishing selling momentum as $GBPUSD continued to probe new lows. Now that price has broken down again to new lows, we see that momentum is finally following suit. The momentum of Friday’s price action has broken the bullish trendline on the RSI. This break lower in the RSI suggests that $GBPUSD will continue to fall lower. But remember that nothing moves in a straight line. A bounce is very possible as price heads into 1.5150, 1.5100 and 1.5000 support levels. Trade what you see.

The $GBPUSD has finally breached the 1.6000 level even closing last week below the big psychological level. It is a level that marked the 50% Fibonacci level of the 2013 rally in cable. Since Friday’s break, however, cable has managed to stage a small, corrective rally back above 1.6000 as high as 1.6130. And despite the pullback from those 1.6130 highs, there is still potential for $GBPUSD to see higher levels on this bounce.

This RSI divergence here on these new lows suggest that this bounce should continue higher into the Fibonacci levels. The 1.6250 level is historically a huge resistance level. Price could also get a boost higher with the release of the FOMC meeting minutes today and the Bank of England monetary policy decision tomorrow. If so, any rally higher becomes as an opportunity to set up for further weakness in cable. The RSI and data releases may give swing traders opportunity to set up at higher, more attractive levels before another push below 1.6000. Bears should be patient and bulls should not get too giddy. Trade what you see.