The rapid growth of the British currency against the US dollar during last 6 weeks reversed into the deep downward correction. The pair grew due to the fall of the USD after the poor main economy sectors statistics releases, as it could affect the USA Fed’s decision to tighten monetary policy.
In the beginning of the month the USD was supported fundamentally, as strong key indices and employment market data were published in the USA. In addition, the pair is going down due to the weakening of the GBP as a result of the uncertain monetary policy position of the Bank of England. The Bank’s representatives note that the economy is ready for the interest rate rise, but no specific action was taken.
Today the statistics in the UK is controversial, so the pair stayed in the sideways stage of the consolidation. Today the Producer Price Index, employment market data and Monthly Budget Statement will be published in the USA. The main data upon the inflation pressure are expected on Friday.
Support and resistance
The strengthening of the USD in the middle term period is expected after the main economy sectors positive data will be published. This year poor releases prevailed, so even not so good results will seem favorable. In addition, the pair can lower due to the growth of the demand on the oversold USD and sales of significantly strengthened GBP.
Technical indicators confirm the forecast, on the daily chart MACD long positions volumes are decreasing, on the smaller charts Bollinger Bands are reversing.
Support levels: 1.2930, 1.2805, 1.2755, 1.2700, 1.2360, 1.2100.
Resistance levels: 1.3125, 1.3200, 1.3270, 1.3310, 1.3170, 1.3400, 1.3510.
In the short term it’s better to increase short positions with the targets at 1.2805, 1.2755, stop loss is 1.3160.