50% of the CPI induces rally yesterday is being tested
The chop continues in the GBPUSD. Yesterday, the pair shot up like a rocket after the better YoY CPI caught summer time traders off guard. That was short lived as the price reversed nearly 50% of the move (low yesterday came in at 1.5643 vs. 50% level at 1.56387).
In today's trading, A move higher initially found sellers again and of the pair is now trading at the 50% at/just under/just above that 50% level at 1.56387 (low came in at 1.5636). The 1.56366 to 1.5649 area (yellow area in the chart above) has been home to a number of swing highs over the last month or so of trading (see blue numbered circles in the chart above).
Yes, there have been a number of extensions above that "yellow area" over that time, with most extensions - prior to yesterday and today - being short lived. This is a test for the buyers. Will they bounce and move away from this "yellow area" OR was the extended extension above the area, just another failure that leads us back into the meat of the range seen over the last month?
A failure and move below the 100 hour MA (blue line at the 1.5631) would be more bearish for the pair.