GBP/USD Back to Key Resistance; Key Fundamental Risks Ahead

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GBP/USD Back to Key Resistance; Key Fundamental Risks Ahead

The GBP/USD made a new low on the year at 1.4564 to start the week.This price decline had signs of a bearish continuation. However, US data so far this week have been disappointing and has taken the steam out of USD-bulls.

GBP/USD 4H Chart 4/16
gbpusd 4h chart 4/16
(click to enlarge)

Reactions to US Data: On Tuesday (4/15), we saw low retail sales and producer price inflation coming out of the US. This helped GBP/USD stay above 1.46, after which it rallied to a key pivot around 1.48. There was resistance here, but after falling back down, GBPUSD held above 1.47, and made another step higher after soft US manufacturing data on Wednesday (4/15). On Thursday (4/16), we saw softer building permits and housing starts data as well as higher unemployment claims. The trend of soft data out of the US gave cable another boost as it stayed above 1.48 and is now cracking the 1.4950 level.

In the 4H chart, we can see that price is now closing in on 1.50 a psychological level and a common consolidation resistance in March and early part of April. This is a key decision point for the GBP/USD, whether it will keep a bearish bias, or whether it will continue to consolidate and possible extend higher in a bullish correction.

Above 1.5010, the next resistance might be a previous resistance pivot at 1.5165. Whether price will make it there might depend on Friday’s (4/17) data.

UK Claimant Count Change (Mar.): 
Forecast: -29.1K
Previous: -31.0K
Average Earnings Index 3m/y (Feb.)
Forecast: 1.8%
Previous: 1.8%
Unemployment Rate (Mar.):
Forecast: 5.6%
Previous: 5.7%

US CPI m/m (Mar.)
Forecast: 0.2%
Previous: 0.2%
Core CPI m/m (Mar.)
Forecast: 0.2%
Previous: 0.2%
US Preliminary UM Consumer Sentiment (Apr.)
Forecast: 93.8
Previous: 93.0

GBP/USD Daily Chart 4/16
gbpusd daily chart 4/16

Let’s see how the market reacts after this set of data. If by the end of the week, GBP/USD closes above 1.5010, it is likely to test the 1.5165 high next week. If it does not close above 1.5010, there will be a bearish outlook at least back towards the 1.4750-1.48 area.

Now a break above 1.5165 will open up a support/resistance pivot area between 1.5485 and 1.5552.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.