Forex Video Briefing (8/13) – GBP/USD, GBP/JPY, EUR/GBP
GBP/USD consolidated ahead of the key releases, but held below a falling trendline seen in the 4H chart. The reaction was very sharp, and bearish, and maintains the bearish outlook. In the daily chart, you can see that price is now testing the lows going back to May-June, at 1.67. There is also the 200-day SMA waiting at the 1.6650 area. There hasn’t been a material consolidation, or bullish correction since GBP/USD fell from the year’s high at 1.7191, and these support factors in the 1.6650-1.67 area could provide support and a strong case for a significant consolidation/correction, especially with the daily RSI dipping below 30 several times, showing oversold conditions.
The GBP/JPY was also in a bullish correction ahead of the jobs data and inflation report. It looked sharper than the one in GBP/USD, but was similar in that it held below a falling trendline. The reaction to the fundamental factors held this short-term bearish trend intact. In the daily chart, you can see that if today’s candle were to close now, it would be a bearish engulfing pattern, which would signal bearish continuation. There should at least be a bearish outlook toward the 200-day SMA, which resides at 170.50 at the moment. There should be some downside risk toward the 170 handle, which is also a common support in May-June. The daily RSI is still above 30, which indicates that from a momentum perspective, there is still some ways to go before traders will say GBP/JPY is oversold.
We also saw sterling strengthen against the Euro ahead of the fundamental releases. EUR/GBP was threatening to break below a rising trendline coming up from the 2014-low at 0.7874, made in July. It was also threatening to invalidate an inverted head and shoulders pattern. The reaction to UK fundamentals confirmed the price bottom, and held the EUR/GBP from turning bearish again. Now, price action suggests some further bullish correction. In the near-term, there is upside toward the 0.8033 resistance pivot. If price can start holding north of 0.7990/0.80, then there could be additional upside risk toward the 0.8080 area, which is where the 100-day SMA and a previous support pivot reside.