Marshall Gittler
Trading Analysis
GBP/USD
The dollar traded unchanged or lower against most of its G10 peers during the European morning Tuesday. It was lower against EUR, SEK, JPY and CAD, in that order, while it remained stable vs GBP, AUD, NZD and NOK. The greenback was higher only against CHF.
The 1st estimate of the UK GDP showed a rise of 0.5% qoq in Q4, weaker than the +0.7% qoq expansion in Q3 and below estimates of +0.6% qoq. The slowdown of growth raises concerns that the recovery is losing steam and may push market expectations for the Bank of England tightening further back. Unless there is a strong compelling reason, the BoE is unlikely to raise rates ahead of the country’s general election in May. More weak UK data could result in rate expectations getting pushed back even further, leaving GBP vulnerable. Nonetheless, GBP/USD only dipped briefly at the release and quickly recovered to trade stable at midday in Europe.
GBP/USD slid somewhat during the European morning Tuesday after hitting resistance at the 61.8% retracement level of the 22nd – 23rd of January plunge, a retracement level that lies fractionally below the resistance of 1.5120 (R1). Our momentum studies imply that the negative wave is likely to continue and perhaps challenge the 1.5035 (S1) barrier. The 14-hour RSI moved lower and now appears able to move below 50, while the hourly MACD has topped and fallen below its signal line. Moreover, I see negative divergence between the RSI and the price action. A dip below 1.5035 (S1) could prompt extensions towards Friday’s low of 1.4950 (S2). As for the broader trend, the price structure on the daily chart still suggests a downtrend. However, I can spot positive divergence between both our daily oscillators and the price action, something that indicates slowing downside momentum, at least for now.
Support: 1.5035 (S1), 1.4950 (S2), 1.4820 (S3).
Resistance: 1.5120 (R1), 1.5200 (R2), 1.5270 (R3).
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