GBP/USD 4HR TF
This week UK’s fundamental news is mostly negative. The UK Services PMI was a disappointment with a drop to 54.4 points, worse than expected. Halifax HPI, which shows the change in house prices, fell by 0.6% instead of rising by the same scale. Manufacturing Production fell short of expectations as it rose by only 0.3%, and last month’s drop was revised – 0.8% instead of 0.8% – double.
On the interest rate decision, It was a big disappointment that came last week. First, the Bank of England didn’t raise the rates. While this was the consensus, this came after we saw that one member voted to raise the rates last month – Andrew Sentance’s vote came on rising inflation that missed the government’s target month by month.
The decision not to raise the rates was later backed with the PPI figures – producer prices dropped last month by 0.2% when expectations stood on a rise of 0.1%. So, maybe the inflationary pressures aren’t too strong as we expected?
With all the bad news, we were `expecting the cable to depreciate but last week GBP/USD were moving sideway between previous week high of 1.5226 and the 38.2% retracement of 1.5092. The cable sentiment was neutral as compared to EUR/USD which is quite bullish. With the euro zone did not showed any improvement in its economic data, it seem that the GBP and EUR strength is more due to US dollar’s weakness rather than its own strength.
On Friday, by Frankfurt open EUR/USD went toppish and started sliding down and the cable was tracking the move. The reversal in EUR/USD could be attributed to an unwinding of some long positions and the pair recovered slightly towards the end of the week while cable kept sliding down.
Technically, GBP/USD after penetrating the ascending trend line, all indicators indicating a bearish bias (see the 30 MTF chart below) with support at 38.2% of weekly high and low. A break of the above support triggered a target support at 38.2% below previous day low at 1.5050. At this level it is also 50% retracement of previous week’s high and low and the mid-point of Pivot point and S1.
The intraday bias is now bearish with GBP/USD testing the uptrend line in place since the beginning of June(see the 4 Hr TF chart). Resistance level was seen first at 1.5166 with the next resistance this week high at 1.5239. Support is at 1.4976.
