Thread: Discuss the GBP/USD with a DailyFX Analyst

Check this out!....short term diamond formation in the 15 minute shows a decline through to the 1.9990 figure in the short term. Initial targets just set at the 2.0120 support.

US Session Technical Update:

Price action remains below both our benchmarks of 2.0397 and near term resistance at 2.0242 keeping our bearish stance intact. However, upside potential would shift into focus should the 2.0268 session high be taken out and purport a test of the 2.0325 resistance.

Further analysis available at:
http://www.dailyfx.com/story/calenda...777671655.html

Attractive short-term setup in GBPUSD. A moderately weak PPI indicator weighed on rate speculation a little earlier this morning, sending pair to support at 2.0150. This level has some backing on both the higher and intraday time frames. On the daily time frame, you have a good 50% fib and a rising 50-day SMA lending some downside support. On the intraday charts we have a confirmed triple bottom on support.

However, I'm not going to chase the retracement into the 2.0150-2.0250 range (I'll leave that up to other risk takers). I have a few trades on right now and this would leverage my potential risk too high. What's more, a rebound runs counter the higher trend, so I see the upside potential as capped; and as such, my objective would likely be limited to 50-60 points. Not worth it for the necessary stop.

Originally Posted by John Kicklighter

Attractive short-term setup in GBPUSD. A moderately weak PPI indicator weighed on rate speculation a little earlier this morning, sending pair to support at 2.0150. This level has some backing on both the higher and intraday time frames. On the daily time frame, you have a good 50% fib and a rising 50-day SMA lending some downside support. On the intraday charts we have a confirmed triple bottom on support.

However, I'm not going to chase the retracement into the 2.0150-2.0250 range (I'll leave that up to other risk takers). I have a few trades on right now and this would leverage my potential risk too high. What's more, a rebound runs counter the higher trend, so I see the upside potential as capped; and as such, my objective would likely be limited to 50-60 points. Not worth it for the necessary stop.

Wow. I hope someone got into that trade. I was writing a report and look back a few minutes later and it is already gone. Now the pair is sitting on major support on the daily time frame. What can push it over the edge? We have CPI tomorrow, employment data Wednesday and retail sales Thursday... Or will be another credit issue that specifically warrants a GBPUSD reaction? However it happens, I will be waiting for the big move.

Looks like GBP sellers touched upon the 2.0120 support in the morning, as expected, but shot straight through the level for a bit before retracing. Coincides with longer term support from the beginning of July. Looking to go long at this point, but would need some consolidation at the current levels before initiating the position.

Overnight PPI printed weaker than expected suggesting that infl;inflationary pressures in Uk are wearing off. The news sent cable through the 2.0100 level as traders bet that 6% money may not happen. But housing data offset some of teh bearish tilt. Housing continues to ramp up with latest price increases showing 12.2% gain against 11% forecast. Those double digit price increases are likely to keep BOE on guard. They key to which way this will resolve itself may be the UK consumer. Retail Sales are due Thursday and if they are weak the prospects of another rate hike will decline markedly.

Originally Posted by DailyFX Analyst

Overnight PPI printed weaker than expected suggesting that infl;inflationary pressures in Uk are wearing off. The news sent cable through the 2.0100 level as traders bet that 6% money may not happen. But housing data offset some of teh bearish tilt. Housing continues to ramp up with latest price increases showing 12.2% gain against 11% forecast. Those double digit price increases are likely to keep BOE on guard. They key to which way this will resolve itself may be the UK consumer. Retail Sales are due Thursday and if they are weak the prospects of another rate hike will decline markedly.

The weak PPI data appears to be setting the stage for a drop in UK CPI, due to be released on Tuesday. While the BOE has remained relatively hawkish, a reading in line with expectations (-0.2% MoM, 2.3% YoY) would cut back speculation of a rate hike in September. Nevertheless, markets are still looking for a hike before the first quarter of 2008, and depending upon how CPI fares in coming months, it will likely occur in November or December.

That said, I see a lot of fundamental support for drop in GBPUSD to the 2.00 level, especially upon a break of short-term trendline support (see 4hr chart - currently just below 2.01)

As before, the GBPUSD remains under our bearish benchmark, currently set at 2.0269, lending to further downside bias in the session. Consolidating at 2.0100 support, the pair continues to look heavy, countering notions of an upturn in momentum indicators. As a result, with a confirming close below the 2.0083 session low, sellers are eyeing formidable bids at the 2.0056 July 6th session low. Penetration below would set the 2.0000 support and 1.9910 50% fib from 1.9184-2.0651 in play.

Dear all,

I made good pips yesterday. We have similar numbers now. For me a good support is 2.0075 (daily MA65). Below that point I see today's S1 (0050) and lower BB 2ds (0060). Pair is near to oversold territory, so it seems that 0050/70 level could be a good option to go long. Below that level I see 1.9970 and 1.9925. Today I would like to reset shorts @0140/50 zone, below MA65 in 1 hour chart.

I agree that support looks attractive in GBPUSD. The daily chart shows a good 38.2% fib of the 3/05 low to 7/24 peak at 2.0085. This happens to coincide with a pivot level (highlighted by the previous swing high back on 4/18 and new support test on 7/6) that was being watched even before the fib was pushing its own influence.

Another argument for a GBPUSD rebound is the resistance the dollar itself is hitting in its own trade-weighted basket. Check out the chart I attached. Spot on the basket is stalling once again just below 81.25. If we can't sustain the exogenous data flow (worries over liquidity pushing the greenback as a reserve currency or speculation that the Fed will have to consider a cut with credit conditions deteriorating in US money markets) then the dollar may very well loose steam.

On the other hand, the pound has its own fundamental worries. Immediately ahead of us we have UK CPI and retail sales. If both of these indicators cross the wires with disappointing numbers, it may breed more doves in the market who think the BoE will have no reason to keep going forward with rates despite the generally hawkish tone the central bank has held on to.

All in all, this is a good risk/reward trade. And, if you want to play it conservatively and at the same time think the dollar is largely in control of these moves, you could always put in a short limit order just below support in EURUSD since it too is sitting on big support.

Anyone else looking at possibly getting long here?

Originally Posted by John Kicklighter

... Anyone else looking at possibly getting long here?

John,
No support found above 2.0... 2.0003 is weekly MA20, and holding at this moment. If pair closes today below 2.0 I don't see long position this week... or this month...

Originally Posted by arodriguez

John,
No support found above 2.0... 2.0003 is weekly MA20, and holding at this moment. If pair closes today below 2.0 I don't see long position this week... or this month...

Well, I ended up taking the same strategy for GPBUSD that I laid out for EURUSD in its respective thread. I was prepared to enter a position on GBPUSD either way with levels set up for both a rebound and a breakout. I was very close to triggering a long position, but a quick decline ended up hitting my short entry at 2.0075. I took profit at 2.00 because I have long dollar exposure in EURUSD too.

You don't think the 100-day SMA, or that combo of the big rising trenline and 50% fib around 1.9925 will hold? Those are the next levels I'll be eying. If GBPUSD breaks below those level, I'll short with an objective of 250 points (though I'll probably get too excited and take 100 or less on a small rebound).

Pund was rocked by very cool inflation data out of UK today. As we noted, "CPI printed at 1.9% year over year rate versus projections of 2.3% increase. The news shaved 80 points off the value of GBPUSD in a matter of minutes as traders completely reassessed the possibility of any additional interest rate hikes from the BoE in the next few months.



As inflationary pressures recede into the background the UK Central bank now has far less reason to maintain its ultra-hawkish posture. especially after last week’s turmoil in global capital markets that created a massive liquidity crunch. Only a surprisingly high reading in monthly wage data or a strong result in UK retail sales both of which report later this week could reignite speculation of additional tightening. For now however, the idea of 6% money by the BoE in September appears to be off the table."

This may keep the pound offered into 1.9800-1.9700 suport

As expected, the market has overshot on speculation of another round of tightening past six percent by the Bank of England. Futures contracts have pared back considerably, with implieds pricing in smaller likelihood of hikes at this point. The sentiment is spilling over into the GBPUSD spot rate. We maintain our stance as per yesterday's technical update in London and follow through in New York...

Penetration below would set the 2.0000 support and 1.9910 50% fib from 1.9184-2.0651 in play.

I'm covering my short here at 1.9970 (+ 647). The proximity of the Sept. '06 through Mar and May '07 trend line may seem irresistible to bargain hunters trying to pick a low (I might just be one of them too ...)