March was an extremely volatile month for the GBPUSD, with the pair trading through close to a 200-pip range as the month progressed. Having declined considerably on March 19 on the potential for longer term rate cuts, the pair bottomed out at 1.6464 on March 24. This level served up considerable support, and throughout the final week of the month, the pair regained all its lost strength to reach monthly highs at 1.6683.
Technical analysis hinted at a medium term reversal, as the GBPUSD formed something of choppy head and shoulders throughout the last couple of days of March and the first couple of days of April. The pattern validated on Thursday, as the UK reported disappointing hosing equity withdrawal data, -10.6B versus forecasts of -9.4B, and a miss on the monthly services purchasing managers’ index release, reported at 57.6 versus a forecast of 58.1. The decline broke the pair through the 200-period moving average, just shy of which it currently trades.
A miss on both headline US employment figure on Friday (nonfarm payrolls reported at 192K versus 200K expectations and unemployment rate reported at 6.7% versus a forecast of 6.6%) has catalyzed a retest of the aforementioned SMA, which, in the absence of any potentially market moving data heading into the weekend, makes this the level to watch for a short medium term bias. If the pair can log a close above the SMA at approximately 1.6605, expect further sterling strength and upside in the pair. Look initially for a target at 1.6611 support, and beyond that, a retest of the head and shoulders neckline at 1.6623.
Conversely, if the 200 SMA holds, look for an initial downside target at intraday support of 1.6571. A close below this level would offer up a secondary downside target of daily / weekly / monthly lows at 1.6554.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com