GBP/USD’s Recovery Could Fail Near 1.2700

Key Highlights

  • The British Pound found support near 1.2475 and recently recovered against the US Dollar.
  • There are two important bearish trend lines in place with resistance near 1.2700 on the 4-hours chart of GBP/USD.
  • The Euro Zone Core CPI declined 0.3% in Nov 2018 (MoM), more than the forecast of -0.2%.
  • Today, the US Housing Starts for Nov 2018 will be released, which is forecasted to rise from 1.228M to 1.234M (MoM).

GBPUSD Technical Analysis

The British Pound declined heavily this past week after it broke the 1.2750 support against the US Dollar. The GBP/USD pair traded below the 1.2550 support before buyers appeared near the 1.2475 level.

GBPUSD Technical Analysis British Pound US Dollar

Looking at the 4-hours chart, the pair started a short term recovery from the 1.2475 support. It climbed above the 1.2500, 1.2560 and 1.2600 resistance levels. There was also a break above the 38.2% Fib retracement level of the last decline from the 1.2839 high to 1.2476 low.

However, the pair is facing a solid resistance near the 1.2675 and 1.2700 levels plus the 100 simple moving average (red, 4-hours). More importantly, there are two important bearish trend lines in place with resistance near 1.2700.

Therefore, it won’t be easy for buyers to clear the 1.2700 hurdle in the short term. Above 1.2700, the pair is likely to move into a positive zone and it could climb towards 1.2800 or even 1.2850.

On the downside, the 1.2560 level is an initial support, below which there is a risk of more losses towards 1.2500 or 1.2475.

Fundamentally, the Euro Zone CPI figure was released by the Eurostat. The market was looking for a decline of 0.2% in the CPI in Nov 2018 compared with the previous month.

The result was similar to the forecast, but the Core CPI fell 0.3% in Nov 2018, which was more than the market expectation of -0.2%. The Core CPI yearly change was +1.9%, less than the forecast of 2%. The report stated that:

The lowest annual rates were registered in Denmark (0.7%), Ireland (0.8%) and Portugal (0.9%). The highest annual rates were recorded in Estonia, Hungary and Romania (all 3.2%).

EUR/USD recovered recently, but there are many hurdles for buyers on the upside similar to GBP/USD.

Economic Releases to Watch Today

  • German IFO Business Climate Index for Dec 2018 – Forecast 101.7, versus 102.0 previous.
  • US Housing Starts Nov 2018 (MoM) – Forecast 1.234M, versus 1.228M previous.
  • US Building Permits Nov 2018 (MoM) – Forecast 1.265M, versus 1.263M previous.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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