GBP/USD – Losses Should be Limited

GBP/USD – Losses Should be Limited

It has been a tough week for GBP/USD. After rejecting 1.55 sterling reversed course to trade sharply lower against the greenback. The decline was driven by the combination of U.S. dollar strength and the belief that easier monetary policy in China and the Eurozone will cause the Bank of England to delay tightening. However the BoE was never expected to raise interest rates in 2015 and at the earliest we’ll see a rate hike in the first half of next year. So what should matter the most to the pound is U.K. data. Yesterday’s retail sales number was hot. This was the strongest month for spending in 2 years, setting a sound foundation for next week’s UK GDP report. Retail sales is the most important contributor to growth. While the dollar is bid today we believe it will trade lower ahead of and after FOMC. The uncertainty in Fed policy should lead to profit taking on long dollar trades and with zero chance of a rate hike, the FOMC statement will probably disappoint.

Technically, lower highs and lower lows is bearish for GBP/USD and the currency pair is trading slightly under the July low of 1.5330. While today’s move doesn’t constitute a clean break, we could see a brief dip below 1.5300. However GBPUSD should find support above 1.52, and the 23.6% Fibonacci retracement of the 2014 to 2015 decline. If GBP/USD turns around, resistance is back up at 1.55

Chart Of The Day

Leave a Comment

Your email address will not be published. Required fields are marked *