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.
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.):
Average Earnings Index 3m/y (Feb.)
Unemployment Rate (Mar.):
US CPI m/m (Mar.)
Core CPI m/m (Mar.)
US Preliminary UM Consumer Sentiment (Apr.)
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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