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GBP/USD Recovery Approaching Key Juncture

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Aayush Jindal

Key Highlights

  • The British Pound recovered recently aftertrading as low as 1.2439 against the US Dollar.
  • GBP/USD is now struggling below the 1.2580resistance and a bearish trend line on the 4-hours.
  • The NY Empire State Manufacturing Indexincreased from -8.6 to 4.3 in July 2019.
  • The UK Claimant count in June 2019 could changeby 18.9K, less than the last 23.2K.

GBPUSD Technical Analysis

After a strong decline, the British Pound found support near 1.2440 against the US Dollar. The GBP/USD pair started a short term correction above 1.2500, but it is facing a lot of hurdles on the upside.

GBPUSD Technical Analysis British Pound US Dollar

Looking at the 4-hours chart, the pair traded as low as 1.1438and recently corrected above the 1.2500 and 1.2520 resistance levels. Besides,there was a break above a connecting bearish trend line at 1.2505.

The pair extended its recovery above 1.2540 plus the 23.6%Fib retracement level of the downward move from the 1.2783 high to 1.2439 low. However,the pair struggled to clear the 1.2575-1.2580 resistance area.

Moreover, there is a strong resistance forming near the1.2580-1.2600 area plus a bearish trend line on the same chart. Besides, the 100simple moving average (red, 4-hours) is positioned near the 50% Fib retracementlevel of the downward move from the 1.2783 high to 1.2439 low.

Therefore, the 1.2580 and 1.2600 levels are likely to act assignificant resistances if the pair continues to rise. A successful close above1.2600 and the 100 SMA might start a strong upward move in GBP/USD towards the1.2650 and 1.2700 levels.

Conversely, if there is no upside break above the 1.2600resistance, the pair could resume its decline. An immediate support is at1.2500, below which there is a risk of more losses towards 1.2440.

Fundamentally, the NY Empire State Manufacturing Index forJuly 2019 was released by the Federal Reserve Bank of New York. The market waslooking for a rise from -8.6 to 2.0.

The actual result was better than the market forecast, as theNY Empire State Manufacturing Index climbed higher sharply to 4.3 in July 2019.

The report added:

New orders were little changed, and shipments in-creased. Unfilled orders and inventories continued to move lower, while delivery times were longer. The employment index remained negative, falling to its lowest level in nearly three years.

Overall, GBP/USD could struggle to break the 1.2600 resistance area. Similarly, EUR/USD is facing a strong resistance near the 1.1300 area.

Economic Releases to Watch Today

  • UK Claimant Count Change June 2019 – Forecast 18.9K,versus 23.2K previous.
  • UK ILO Unemployment Rate May 2019 (3M) –Forecast 3.8%, versus 3.8% previous.
  • German ZEW Economic Sentiment Index for July2019 – Forecast -20.0, versus -21.1 previous.
  • US Retail Sales June 2019 (MoM) – Forecast+0.2%, versus +0.5% previous.
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