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GBPUSD Support Turned Resistance (Aug 10, 2016)

Daily Forex Reports | by Kate Curtis | Wednesday, 10 August 2016 03:52 UTC

GBPUSD is pulling up from its recent slide and looks ready to test the nearby resistance levels. Applying the Fib tool on the latest swing high and low on the 1-hour chart shows that the 38.2% retracement level lines up with a broken support zone around the 1.3100 major psychological mark, which might now hold as resistance.

This is also close to the 100 SMA, which can hold as a dynamic inflection point. In addition, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the moving averages is widening, which reflects strengthening bearish pressure. If any of the Fib levels keep gains in check, GBPUSD could resume its drop to the previous lows near 1.2950.

Stochastic is already in the overbought area so buyers are feeling exhausted and may allow sellers to take over. However, the oscillator hasn't crossed down yet so a higher pullback to the 50% Fib near the 200 SMA could still be possible.

Yesterday, BOE official McCafferty revealed in an op-ed piece that the central bank might need to cut interest rates further if economic activity worsens. To top it off, the UK trade balance missed expectations and showed a wider trade deficit of 12.4 billion GBP in June, likely putting a dent on overall economic growth. 

As for the US dollar, data came in mostly better than expected, with productivity and unit labor costs outpacing estimates. However, traders seem to be booking profits after the labor market didn't seem as strong as the July NFP report suggested.

For today, US JOLTS job openings data is up for release. There are no reports up for release from the UK, which suggests that market sentiment could be a bigger driver of price action for today.

By Kate Curtis from Trader's Way

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