GBP/USD Holding Gains Above Crucial Support16 October, 2018 by Aayush Jindal in Market Analysis
- The British Pound declined recently and tested the 1.3080-1.3100 support against the US Dollar.
- GBP/USD tested a connecting bullish trend line with support at 1.3100 on the 4-hours chart.
- The US Retail Sales in Sep 2018 increased 0.1%, less than the +0.5% forecast.
- Today, the US Industrial Production for Sep 2018 will be released, which is forecasted to increase 0.3% (MoM).
GBPUSD Technical Analysis
The British Pound started a downside correction after testing the 1.3250 resistance against the US Dollar. The GBP/USD pair traded below the 1.3150 support, but buyers protected the key 1.3080-1.3100 support.
Looking at the 4-hours chart, the pair formed a high at 1.3257 and corrected below the 38.2% Fib retracement level of the last wave from the 1.2921 low to 1.3257 high. However, the downside move was protected by the 100 simple moving average (red, 4-hours) and 1.3080 level.
Moreover, the 50% Fib retracement level of the last wave from the 1.2921 low to 1.3257 high also acted as a support. It seems like the pair completed a downside correction at a major technical support and it could continue to move higher above 1.3200.
On the upside, the key resistances above 1.3200 are at 1.3220 and 1.3250. On the flip side, there is a connecting bullish trend line formed with support at 1.3100 on the same chart.
As long as the pair is trading above the trend line, 1.3080, and the 100 simple moving average (red, 4-hours), it may possibly continue to move higher.
Fundamentally, the US Retail Sales report for Sep 2018 was released by the US Census Bureau. The market was looking for a rise of around 0.5% in sales compared with the previous month.
However, the actual result was disappointing as there was only 0.1% rise in sales in Sep 2018, which was similar to the last reading. Looking at the Retail Sales ex Autos, there was a decline of 0.1%, whereas the market was positioned for a 0.3% rise.
Overall, the US Dollar faced an increased selling pressure, which may perhaps help GBP/USD and EUR/USD in the short term.
Economic Releases to Watch Today
- UK Claimant Count Change August 2018 – Forecast 10.0K, versus 8.7K previous.
- UK ILO Unemployment Rate Sep 2018 (3M) – Forecast 4%, versus 4% previous.
- German ZEW Business Economic Sentiment Index for Oct 2018 – Forecast -11.3, versus -10.6 previous.
- Euro Zone Trade Balance August 2018 – Forecast €14.1B versus €12.8B previous.
- US Industrial Production Sep 2018 (MoM) – Forecast 0.3%, versus +0.4% previous.
- US Capacity Utilization Sep 2018 – Forecast 78.2%, versus 78.1% previous.