The GBP/USD started this week with a new low on the year at 1.5540, then immediately rebounded. The pullback was due to meet resistance around 1.5660-1.5680, where we have a the 100- and 50-hour SMA in the 4H chart as well as a falling speedline coming down from the 1.5825 pivot in November.
The 4H chart shows that price has indeed pushed at the 1.5680 area (up to 1.5695), and briefly cracked the 200- and 100-period SMAs as well as the falling speedline.
During early 12/9 European session, UK’s Office of National Statistics reported worse than expected manufacturing production data:
UK Manufacturing Production m/m (October): -0.7%
This is the second negative and second worse reading this year, reflecting some shakiness to the UK’s recovery. However, being for October, this data point is not likely going to have that much impact except within the session. So far, the market is showing respect to the resistance, and the poor manufacturing data point might have helped it make the turn around.
USD to be the Driver: The trajectory of GBP/USD for the rest of this week is likely going to be a USD-story for the most part. The rally in GBP/USD so far this week was accompanied by one in EUR/USD and a dip in USD/JPY, showing that it has been a USD-story. Also, we are not going to have any key fundamental factors out of the UK to shake up the sterling pound.
The Correction Scenario: Now, let’s say today’s resistance around 1.5695 fails to hold. The next line of defense for the bearish outlook, will be around 1.5735-40, which is a common resistance seen in the 4H chart. On the daily chart, we can see a falling trendline from July reinforcing this resistance area. A break above 1.5750 might signal a shift from a bearish mode to a consolidation or even bullish correction mode.
GBP/USD Daily Chart 12/9
(click to enlarge)
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