GBPUSD is still hovering around the 1.5500 major psychological level and may be looking to erase its recent gains soon. Price is finding resistance at the 50% Fibonacci retracement level as well while the 100 SMA crossed below the 200 SMA, signaling a potential move lower.
Both RSI and stochastic are starting to move down from the overbought region, also confirming that bearish momentum is building up. If the selloff resumes to the previous lows, a head and shoulders pattern could be created, which would signal longer-term declines for GBPUSD.
The nearby support at the 1.5200 major psychological level could be tested first, as this would serve as the neckline of the potential head and shoulders pattern. A break below this area could push price lower by an additional 600 pips until the previous lows at 1.4600, as the chart pattern is of the same size.
GBPUSD Fundamental Factors
Strong data from the US, mainly its jobs and retail sales figures for May, could keep the dollar supported in the long run since these imply that the Fed would be on track to hike interest rates in September. The May jobs report surprised to the upside with a 280K gain in hiring while the headline retail sales printed a 1.2% gain for the same month.
As for the UK, data has also been strong but not strong enough for the BOE to shift to a more hawkish stance. Recall that the economy recently showed a negative headline CPI, which suggests that the central bank might be inclined to keep their stimulus in place for much longer.
There are no reports lined up from the UK economy today while the US is set to print its PPI reports. The headline reading could show a 0.4% gain while the core version of the report could print a 0.1% uptick, with stronger than expected results likely to spur more dollar rallies.
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