Our take on the GBP this morning...
The aftermath of yesterday’s disappointing UK inflation print saw the GBP aggressively plummet lower against its US counterpart. As can be seen from the H4 scale, both December’s opening base at 1.2516 and the psychological level 1.25 were taken out during this bearish assault, and only began stabilizing once price connected with the H4 mid-way support at 1.2450.
As far as structure goes, there is unfortunately very little direction seen on the bigger picture at this time. The weekly candles are currently trading mid-range between the 2017 yearly opening level at 1.2329 and a weekly Quasimodo resistance coming in at 1.2673. By the same token, a similar pattern exists on the daily chart. Daily price is loitering between a daily demand at 1.2252-1.2342 (bolstered by a daily trendline support stretched from the high 1.3437) and a daily supply penciled in at 1.2728-1.2657.
Our suggestions: Seeing as how the pair lacks higher-timeframe (structural) direction at present, our attention is drawn to the H4 supply at 1.2547-1.2520 (green circle) for a possible bounce today. In addition to this zone’s strong bearish momentum, the area brings together a H4 trendline resistance taken from the high 1.2582, as well as December’s opening level at 1.2516. This confluence, as long as the H4 candles do not close above 1.25 on approach, would be sufficient enough to permit a short without the need to wait for additional confirmation, in our opinion. The reason for not wanting to see a H4 close above 1.25 on approach is that there is a rather large risk that buyers will look to defend this line and with our short just a few pips above here, which would naturally put us in a vulnerable position!
Data points to consider: UK employment data at 9.30am. US CPI and US retail sales scheduled for release at 1.30pm, with another day of testimony from Fed Chair Janet Yellen at 3pm. FOMC member Harker speaks at 5.45pm GMT.
Levels to watch/live orders:
• Buys: Flat (stop loss: N/A).
• Sells: 1.2547-1.2520 (possible area to sell from without the need for additional confirmation, stop loss: 1.2252).
As far as structure goes, there is unfortunately very little direction seen on the bigger picture at this time. The weekly candles are currently trading mid-range between the 2017 yearly opening level at 1.2329 and a weekly Quasimodo resistance coming in at 1.2673. By the same token, a similar pattern exists on the daily chart. Daily price is loitering between a daily demand at 1.2252-1.2342 (bolstered by a daily trendline support stretched from the high 1.3437) and a daily supply penciled in at 1.2728-1.2657.
Our suggestions: Seeing as how the pair lacks higher-timeframe (structural) direction at present, our attention is drawn to the H4 supply at 1.2547-1.2520 (green circle) for a possible bounce today. In addition to this zone’s strong bearish momentum, the area brings together a H4 trendline resistance taken from the high 1.2582, as well as December’s opening level at 1.2516. This confluence, as long as the H4 candles do not close above 1.25 on approach, would be sufficient enough to permit a short without the need to wait for additional confirmation, in our opinion. The reason for not wanting to see a H4 close above 1.25 on approach is that there is a rather large risk that buyers will look to defend this line and with our short just a few pips above here, which would naturally put us in a vulnerable position!
Data points to consider: UK employment data at 9.30am. US CPI and US retail sales scheduled for release at 1.30pm, with another day of testimony from Fed Chair Janet Yellen at 3pm. FOMC member Harker speaks at 5.45pm GMT.
Levels to watch/live orders:
• Buys: Flat (stop loss: N/A).
• Sells: 1.2547-1.2520 (possible area to sell from without the need for additional confirmation, stop loss: 1.2252).
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