GBP/USD Analysis: Wednesday’s upsurge was more like a stop-run than a fresh breakout
|On Wednesday, the GBP/USD pair surged through the 1.3900 handle for the first time since the Brexit vote in June 2016 but gave up a major part of its strong gains. A goodish US Dollar rebound supported upbeat industrial production/capacity utilization data and the Fed's Beige Book, kept a lid on any further up-move.
Yesterday's strong upsurge lacked any fundamental trigger and the subsequent price-action now seems to suggest that the momentum was led by some short-covering following a break above 1.3835 resistance. The 1.3835-40 region marks a short-term ascending trend-channel resistance and hence, it would be prudent to wait for some follow-through buying interest before positioning for any further appreciating move.
In absence of any fresh macroeconomic data from the UK, traders would take cues from the US economic releases - housing market data, Philly Fed Manufacturing Index and weekly initial jobless claims.
Meanwhile, a sustained move beyond the mentioned ascending trend-channel hurdle would confirm a fresh bullish breakout and assist the pair to make a fresh attempt towards reclaiming the 1.3900 handle. A follow-through momentum has the potential to continue boosting the pair even beyond 1.3940-45 area (Wednesday's swing high) towards testing the key 1.40 psychological mark resistance.
On the flip side, any meaningful retracement is likely to find support near the 1.3800 handle, which if broken could extend the corrective slide back towards 1.3740 support area en-route the 1.3700 round figure mark and 1.3660 support.
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