GBP/USD slipped below the 1.70 handle and possibly triggered the unwinding of many bullish bets after Bank of England Governor Mark Carney ended the belief that the Bank was close to tightening, by saying they were surprised at how weak wage data has been. With May inflation remaining near the lowest level in 4 ½ years, the Bank of England is unlikely to raise rates until next year.
In my last British pound post, I highlighted the bullish channel on the daily chart for GBP/USD that has been in place since last summer will have difficulty breaking above the 1.7300 critical resistance area. The strong bullish trend may remain intact, but if we see the 60-minute chart’s three-drives-to-a-bottom pattern invalidated, we may finally see momentum take price to the 1.6800 area. Immediate downside targets include the 50-day SMA at 1.6848, followed by the 100-day SMA at 1.6734.
To the upside, 1.7100 will provide initial resistance with 1.7300 being critical resistance.
The trade: Buy GBP/USD at 1.6970 with a stop loss at 1.7020 and a take profit at 1.6850. The Risk/Reward Ratio is around 1:2.5.
Edward J. Moya
WorldWideMarkets Online Trading