GBP/USD – Relying on Support at 1.5950 Level

GBP/USD for Friday, October 11, 2013

In the last month the GBP/USD has rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250.   For the last week or so however it has been easing back towards 1.60 and 1.5950 with the latter level recently broken in the last day or so.   In the last 24 hours it has rallied back above 1.5950 receiving support at this level.   A couple of weeks ago it found solid support from the 1.5950 level which helped it move well up to the 1.6250 level, and it is relying on this level again presently.   It did stall around 1.59 to 1.5950 for a few days a few weeks ago before clearing this area of congestion. About a month ago it fell down to a two week low near 1.54 before rallying back towards 1.5550. The week before it did well to maintain its level above the key 1.56 level and in the process moving to a new two month high above 1.57 which has now been surpassed by the recent high. It immediately retreated strongly but continued to receive solid support from the 1.56 level before closing below at the end of that week.

Back in the middle of August the pound surged higher to through the resistance level at 1.56 to a then two month high around 1.5650, before spending the next few days consolidating and trading within a narrow range around 1.5650, receiving support from the key 1.56 level. A couple of months ago the resistance level at 1.54 was proving to be quite solid, and once it broke through the pound surged higher to a new seven week high near 1.56 in a solid 48 hour period run. In the week leading up to this the pound had recovered strongly and returned to the previous resistance level at 1.54 after the week earlier undoing some of its good work and falling away sharply from the resistance level at 1.54 back down to around 1.5150 and a two week low. A few weeks ago the 1.54 resistance level stood firm and the pound fell away heavily, however the 1.51 support level proved decisive and helped the pound rally strongly.

Earlier in July after having done very little for about a week, the GBP/USD started to move and surge higher and move through the 1.52 and 1.53 levels to the one month high above 1.54. Prior to the move higher, it moved very little as it found solid support at 1.51 and traded within a narrow range above this level. It established a trading range in between 1.51 and 1.52 after it took a breather from its excitement just prior when it experienced a strong surge higher moving back to within reach of the 1.52 level from below 1.49, all in 24 hours. About a month ago it did well to climb off the canvas and move back above 1.49 and towards 1.50 again before seeing the pound reverse and head back down below 1.49 to reach a new multi-year low near 1.48. It experienced sharp falls moving from 1.53 down to the key long term level of 1.50 and then through 1.49. That movement saw it resume its already well established medium term down trend from the second half of June and move it to a four month low.

The International Monetary Fund is urging George Osborne to boost spending on Britain’s infrastructure despite revising upwards its forecast for UK growth by more than for any other developed country. In a generally downbeat assessment of the state of the global economy, the Washington-based fund said it now expected the pace of expansion to be significantly higher than three months ago. But it triggered a fresh dispute between Osborne and his Labour shadow Ed Balls over whether the government’s austerity programme had helped or hindered recovery from Britain’s deepest recession of the postwar era. The fund’s half yearly world economic outlook cut its forecast for global growth in 2013 and 2014, blaming the impact of ham-fisted attempts to cut the budget deficit in the US and a slowdown in top emerging market economies. But it said the UK had bucked the trend, revising its estimates of growth up by 0.5 points to 1.4% in 2013 and by 0.4 points to 1.9% in 2014. The IMF embarrassed the chancellor in its WEO in April this year, when it called on the UK to ease up on its austerity plans in order to boost the recovery prospects. Although theCity expects growth of about 1% in the third quarter, the fund repeated its call for higher public spending.

(Daily chart / 4 hourly chart below)

GBP/USD October 11 at 00:45 GMT   1.5970   H: 1.5979   L: 1.5913

GBP/USD Technical

During the early hours of the Asian trading session on Friday, the GBP/USD is consolidating in a narrow range just below 1.60 after having rallied back above the support level at 1.5950.   Since the middle of June the pound has fallen very strongly from the resistance level at 1.57 back down towards the long term key level at 1.50 and is now enjoying a solid resurgence over the last couple of months moving back to above 1.62 and its highest point for the year. Current range: Right below 1.60 around 1.5980.

Further levels in both directions:

• Below: 1.5950 and 1.5800.

• Above: 1.6100 and 1.6250.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for the GBP/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The GBP/USD long positions ratio has moved back below 30% again as the GBP/USD has pushed back above 1.5950.   Trader sentiment remains heavily in favour of short positions.

Economic Releases

• 23:50 (Thu) JP M2 Money Supply (Sep)
• 23:50 (Thu) JP CGPI (Sep)
• 12:30 CA Unemployment (Sep)

*All release times are GMT

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