Richard Perry
Independent Analyst
GBP/USD
Cable stands on the brink of a key breakdown. For weeks, the support band around $1.2950 has been holding firm, protecting the $1.2900 December low. However, a solid negative candle yesterday was the first time this year that the market has dropped into the $1.2950/$1.3000 support band and not seen it as an opportunity. There is now a deterioration coming through on momentum indicators as the Stochastics confirm the breakdown and RSI drops to a four month low. The mild consolidation this morning comes ahead of payrolls data later, but a continued failure to not react back above $1.3000 would signal a shift in sentiment on Cable. The risk is now for a test of the $1.2900 December low. Taking a step back and on a multi-month basis this still looks to be a sideways ranging market, with the prospect that downward pressure could weigh back towards the November low at $1.2765 and still be in a medium term range. However, now there is a negative bias to the consolidation, something that has not been a feature previously. Initial resistance at $1.3000 and a lower high at $1.3070.
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