Technical Analysis of the GBPUSD for September 5th, 2014
The GBPUSD tested the key 38.2% retracement target (move up from the 2013 low to the 2014 high) at the 1.68814 level (low reached 1.6878) just before the employment release and bounced higher. Is the low now in place?
The answer is YES as risk can be defined.
The GBPUSD moved up from 1.48119 in 2013 to a high of 1.71898 just a few months ago. That is a pretty good move higher. The economic fundamentals supporting that move were positive of course. At the same time, the US situation was not all that bad either. Some may argue that the US and the UK are on the same economic paths.
So seeing the correction take the price from 1.71898 to 1.6278 can be perplexing from the perspective of “what has really changed in the UK to warrant such a move”. The one thing that is in play is the Scotland referendum which if passed is considered bearish for the GBP. That fear seems to be the driving force behind the move lower. If that fear subsides. That could swing the sentiment back to the upside, especially after this weak but head scratching employment report.
Technical Analysis: The GBPUSD tested and held the 38.2% retracement level and held.
From a purely technical perspective, the holding of the 38.2% is a good base to build off of. Risk can now be defined against the level. Don’t get me wrong, if the technical picture starts to deteriorate (i.e., a move back below the 38.2% would do that as an example), I would be the first to get out and reevaluate. However from the daily chart, I like the bounce.
Does the hourly chart have shorter term clues that support a move higher?
Looking at the hourly chart below, the price bounce is currently finding resistance against the 1.6323 level. This is the underside of the broken trend line from yesterday. If the price can extend and stay above this level, it would be another sign that the buyers are taking back “some control” at least. The targets above will be 1.63496 and 1.63715 where the 38.2-50% of the trend move lower yesterday is found. The topside channel trend line is also at the 1.6371 level. Should the bulls take the price higher today, this would represent a tough level to extend the range. I would expect traders to use the level to square up before the weekend and see what the weekend press does to the market on Monday.
Technical Analysis: The price is testing broken trend line resistance at 1.6323 . A move above will look toward 1.6350 and 1.6371
So the bullish bias is not fully turned around just yet in the hourly analysis, but a break of the 1.6323 level will give added confidence.
What about the shorter term 5 minute chart? Any bullish developments there to support a move higher?
If you look at the price action from the 5 minute chart below, the 1.63046 is the mid point of the days range. It is also was near some lows (see blue circles in the chart below). We are above those levels currently (bullish). This is a close risk defining level. Stay above bullish. Move below, not so bullish anymore for today. KEY LEVEL.
The low saw a failed break below the red 2 circle. We know that to be the 38.2% retracement area. So that was bullish.
ON the topside, lows from late yesterday and highs from today make the 1.63304 area a key level to get above.
The conditions are there for a rally, but there is some work to be done with a move above the 1.6323-30 area. If done, the upside can open up more. RISK: 1.6304 now.
Technical Analysis: The 5 minute chart is showing some bullish bias above 1.63046.
