The downward trend observed in the instrument in the late May and early June was just a correction before the new upward wave. It became clear in the beginning of the current week when the upward correction in the framework of the downward channel turned into a serious upward trend. The pair broke through the upper border of the range and rocketed higher.
The main catalyst of this rapid growth was radical decrease of investor demand for USD. While the US currency dropped, EUR and GBP attracted the investors’ interest. At the same time the head of the Bank of England Mark Carney supported the national currency with positive comments about the prospects of economic growth in the UK. He also pointed out that in case the economic situation improves the regulator will start winding up stimulation measures. In view of this the pair gained over 250 points within two trading days.
Special attention today should be paid to the data on the US economic growth rate. In the end of the week the data on GDP and volumes of commercial investments are due from the UK. The USA will respond with releases on personal expenditure and consumer sentiment index.
Support and resistance
In the short term the pair may consolidate around the levels of 1.3040, 1.3200, if trading tendencies remain unchanged and the fundamental background supports the growth of the pound. After that, long downward correction may be expected. Technical indicators on the D1 chart confirm the possibility of correction: the pair has reached the upper line of Bollinger Bands.
Support levels: 1.2955, 1.2910, 1.2890, 1.2770, 1.2700, 1.2620, 1.2560, 1.2500, 1.2365.
Resistance levels: 1.3040, 1.3075, 1.3115, 1.3155, 1.3270, 1.3300.
In this situation pending sell orders can be placed at the levels of 1.3075, 1.3115 with target at 1.2770. Stop-loss may be set at 1.3250.