GBP/USD Signaling Bearish Continuation Below 1.300014 January, 2020 by Aayush Jindal in Market Analysis
- GBP/USD failed to recover above 1.3200 and declined more than 200 pips.
- The pair broke a crucial triangle support at 1.3110 on the 4-hours chart.
- The UK Industrial Production decreased 1.2% in Nov 2019 (MoM).
- The US CPI could increase 2.3% in Dec 2019 (YoY), more than the last 2.1%.
GBP/USD Technical Analysis
Earlier this month, GBP/USD topped near 1.3280 and later started a fresh decline. Recently, the British Pound broke a couple of important supports near 1.3100 to enter a bearish zone against the US Dollar.
Looking at the 4-hours chart, the pair traded below the 50% Fib retracement level of the last major upward move from the 1.2906 low to 1.3282 high.
More importantly, the pair broke a crucial triangle support at 1.3110 and settled below the 100 simple moving average (red, 4-hours). It declined below 1.3000 and the 76.4% Fib retracement level of the last major upward move from the 1.2906 low to 1.3282 high.
Therefore, there is risk of more downsides towards the 1.2900 support area. Any further losses might start a large decline in GBP/USD towards the 1.2800 and 1.2780 support levels.
Conversely, the pair is likely to face a strong resistance near 1.3070 and the 100 SMA (if it starts an upside correction). To move into a positive zone, the pair needs to settle above 1.3100 and the 100 SMA.
Fundamentally, the UK Industrial Production report for Nov 2019 was released by the National Statistics. The market was looking for the production to decline 0.1% in Nov 2019 compared with the previous month.
The actual result was very disappointing, as the UK Industrial Production decreased 1.2%. On the other hand, the last reading was revised up from +0.1% to +0.4%.
The report added:
Total production output decreased by 0.6% for the three months to November 2019, compared with the three months to August 2019; this was led by manufacturing output, which fell by 0.8%.
Overall, GBP/USD remains at a risk of more losses towards 1.2920 or 1.2900 in the near term. Besides, EUR/USD is somehow holding the key 1.1085 support area.
Upcoming Economic Releases
- US CPI Dec 2019 (MoM) – Forecast +0.3%, versus +0.3% previous.
- US CPI Dec 2019 (YoY) – Forecast +2.3%, versus +2.1% previous.
- US CPI Ex Food & Energy Dec 2019 (YoY) – Forecast +2.3%, versus +2.3% previous.