The GBP/USD daily chart displays a key rejection around the critical resistance 1.6800 area. Last month, price climbed to 1.6821 and made a new 4-year high. The 1.70 level remains a key price barrier and appears to be defended by macro traders. Today, Bank of England Governor Mark Carney’s told lawmakers that the British economy is not overheating regardless of the rapid improvement that took place last year. The pound fell as the Governor’s comments seemed more dovish and supported a stance that will keep interest rates at the record-low 0.5% level that has been in place since 2009. Despite earlier news of continued strength regarding manufacturing production, the pound remains heavy.
Currently price is situated well above all three key Simple Moving Averages (200-, 100-, and 50-day) and appears poised for further downside as momentum readings could suggest one last key thrust lower. If price falls below the 50-day SMA which is currently at 1.6536, key support will reside at 1.6457 which could also highlight the potential formation of a bullish Gartley pattern. If this pattern does not provide a bullish bounce, price may look to continue all the way down towards the 1.6380.
The trade: Sell GBP/USD at 1.6610 with a stop loss at 1.6666 and a take profit at 1.6460. The Risk/Reward Ratio is just under 1:3.
Edward J. Moya
WorldWideMarkets Online Trading