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Technical Analysis: GBP/USD

Posted by Akhilesh Ganti on May 13, 2013 7:55:00 PM

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The Great British Pound (GBP), which had been trading in an ascending parallel channel since late February, has broken out to the downside. Price action had been constructive for the pair but the 50% retracement level of the down move from 1.6381 to 1.4832 which came in at 1.5606 rebuffed any further advances for now. The subsequent deterioration breached the lower channel boundary yesterday as the prospect of a firmer US dollar appears to have brought the bears out of hibernation. The focus shifts to key support level at 1.5197 which was the daily low seen on 04/23. A conclusive break of this would open the way for a test of 1.5034 and possibly the 03/12 low of 1.4832. Conversely, the GBP/USD would have to retake the 1.5412/20 level to negate the bearish momentum that the USD positive environment has generated. {chart:Bloomberg}(click to enlarge)

There are a couple of data events out this week that could influence the near-term direction of this pair and they both occur on Wednesday. First is the Claimant Count change which is the initial indication of the employment situation. This is followed by the Bank of England's (BOE) inflation report. While the UK economy has shown some improvement recently, expectations are for the BOE to present a cautious assessment of the economic outlook thereby keeping the door open for further monetary policy initiatives over coming months.

 

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