Forex Video Briefing (8/20) – GBP/USD, GBP/JPY, EUR/GBP
As you can see on the 4H GBP/USD chart, the market is very bearish. It has been persistent since cable retreated from 1.7191, which was the 2014-high made in July. The week started with a rejection at 1.6735, after which price fell to 1.66. It held there today after the BoE minutes. However, you can see that there is no sign of a reversal, or any consolidation of significance. A break above 1.6750 will be needed to initiate an outlook for consolidation/bullish correction. Otherwise, downside risk remains back toward 1.66, and toward the next key support at 1.6465. When looking at the daily chart, you should note that price has broken below the 200-day SMA, which adds to the bearish outlook already in play since mid-July.
The GBP/JPY has been bearish in August, choppily trading down since the 175.36 high on the year made in early July. We started this week falling toward last week’s lows around 170.40. So far, price is showing ability to make a higher low. Then the BoE minutes extended the pullback, and helped it break above a a falling trendline from the July 29 high at 174.22. For now, the 172.00 handle seems to be providing support along with the 100-period SMA in this 4H chart. At this point, we need to see at least a break above 172.60 before considering a shift away from the bearish trend in the short-term. When we look at the daily chart, we can see that the mode has been neutral-bullish. With price right above the 200-day SMA, GBP/JPY has preserved the bullish trend since January of 2012. So if the mode in the short-term is no longer bearish, we can then consider the bullish continuation scenario for the medium-term. Again, we should at least wait until a break above 172.60, and the 4H RSI to push above 70 before considering the bullish outlook.
The GBP/USD looks to remain bearish, and the GBP/JPY looks like it wants to revive the bullish trend, but still has a few challenges. The EUR/GBP is similar to the GBP/JPY in that it wants to revive GBP strength. The EUR/GBP pair has been consolidating since mid- July. On the 4H chart. we see a bullish correction pattern that has formed over the past 3 weeks. Price stalled at 0.8036 last week, and a bullish attempt this week failed to breach this high, forming a price top. It looks like EUR/GBP is ready for a bearish continuation. We still need to see the RSI dip below 40, and preferably below 30 to show bearish momentum develop. Also, if there is a pullback and it holds below 0.80, the bearish case should grow stronger. When we look at the daily chart, we see that price essentially held below a previous resistance pivot at 0.8033, and the RSI reading held below 60. This reflects bears in charge, and the maintenance of the bearish momentum, which suggests price should be pressured back toward the 0.7874 low on the year.