Short term
Trade view / 25 May 2016 at 3:54 GMT

GBPUSD: Buying corrective reactions still in play

Managing Director / Technical Research Limited
New Zealand

GBP has been pushed around over the last couple of days as traders decide whether to rely on the UK Treasury or the Bank of England for forward guidance.

Unsurprisingly, both predict dire consequences from a Brexit, but there are differing views on the inflation outlook. Thursday’s GDP number and Friday’s consumer confidence reports out of the UK are also likely to have an impact on Sterling.

On the other side of the GBPUSD cross, Fed-speak, principally that from Fed chair Janet Yellen on Friday, have the potential the nudge the odds on a June or July rate cut a bit higher. Money markets currently have them at one in three and one two respectively.

Management and risk description

Sterling has successfully completed a “hard retest” of its multi-week Inverse Head and Shoulders reversal formation (see daily chart below) to maintain its Medium Term upside objective of 1.5130.

In the short term, mathematical retracement support now lies at 1.4560/1.4500 to yield next advance toward the 1.4770 level, enroute to the mid 1.4900’s and eventually 1.5130.


Entry: Any dip to 1.4560 – 1.4520 today/tomorrow is seen as providing a Buying opportunity

Stop: 50% at 1.4493 and 50% at 1.4440, initially.


Time horizon:
Allow several weeks for target to be met

GBPUSD daily chart (click to expand) 
GBPUSD  Daily Chart Source: ThomsonReuters

GBPUSD weekly chart (click to expand)
Source: ThomsonReuters

— Edited by Adam Courtenay

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