GBP/USD extended its gains once again, riding higher on the weak US dollar and ignoring the worrying signs from the British economy. For how long can this continue? The jobs report and GDP stand out in a busy week. Here are the key events and an updated technical analysis for GBP/USD.
Inflation slipped back to 3% as expected, easing some pressures from the BOE. UK retail sales plunged by 1.5% in December and it wasn’t only a Christmas sales issue: November’s numbers were revised down. However, pound/dollar enjoyed another significant rally on top of the US dollar’s weakness, as money flows to other economies which are now picking up steam and even before the government shutdown which happened after markets had closed.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
BP/USD Technical Analysis
Pound/dollar kicked off the week with a move on the 1.3830 level (discussed last week). After a pause, the pair continued higher, reaching higher ground.
Technical lines from top to bottom:
We start from higher ground this time. 1.42 is a round number and also served as support a long time ago. 1.4140 is the next level to watch.
The very round level of 1.40 looms above and is a target for many analysts. 1.3945 was a swing high in January 2018.
1.3830 served as support after the break of the financial crisis. 1.3743 is the January 2018 high and should be watched.
The recent cycle high of 1.3620 serves as strong resistance. 1.3550 was the November peak.
1.3460 capped the pair in mid-December and serves as resistance. The round level of 1.33 is a key level of support, working as such around the same period of time.
1.3225 was the high point of September. It is followed by 1.3180, which capped the pair in July.
I remain bearish on GBP/USD
The weakness of the US dollar cannot carry cable higher forever. While the US government shutdown can weigh on the greenback, the economic data coming out of the UK may have a bigger impact in sending the pound lower.
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