GBP/USD has been finding support around the 1.6750 minor psychological level, which coincides with a longer-term rising trend line, for the past forex trading review periods. However, the pair just made a strong downside break, indicating that a deeper selloff could be the in the cards.
Before that happens though, GBP/USD might still make a short-term pullback to the broken support area. The Fibonacci retracement tool shows that this lines up with the 38.2% level. Stochastic is still climbing, which suggests that there is a bit of buying momentum left to trigger a retracement.
Shorting at the 1.6775 area with a stop above the 61.8% Fib and a target of new lows around 1.6600 could yield at least a 3:1 return on risk. Adjusting the stop to entry once price tests the previous lows at 1.6700 could be a good way to reduce risk.
GBP/USD Forex Trading Review
The previous forex trading review articles show that the BOE has shifted to a more cautious stance, now that data from the United Kingdom has shown signs of weakness. In the past, the pound has been supported by rate hike expectations for early 2015, as BOE Governor Carney has noted that the central bank could be ready to tighten monetary policy before the UK general elections take place.
The US dollar continues to be supported by risk aversion and bond yields, as evident in the recent forex trading review sessions. Data from the US has been relatively strong but downward revisions are expected for the first quarter GDP reading. Nonetheless, today’s release of the initial jobless claims and pending home sales data might show improvements and be enough to keep the US dollar supported.
Recall that UK CBI realized sales recently came in much weaker than expected while the GfK consumer climate for the country might also reflect a downturn in sentiment.
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