GBP/USD: the pair may start the correction

Current trend

During the week the pair GBP/USD has been actively growing and by now has reached the level of 1.3028 (the pound gained about 2.2%). Market optimism was mainly connected with hints at possible tightening of the monetary policy by the Bank of England. The head of the regulator Mark Carney announced it at the ECB conference, and chief economist of the British central bank Andy Haldane pointed out that he would vote for the increase of interest rates in 2017.

An optimistic signal for the traders on Thursday was a positive vote of the UK Parliament on Theresa May’s government draft. At the recent election her Conservative Party lost its majority. However, no political crisis happened due to a union with smaller parties.

GDP data for Q1 2017 released today did not have a considerable impact on the market. As expected, in quarterly terms the indicator made up 0.2%, and YoY – 2.0%. Currently the pair is being technically corrected.

Support and resistance

From the technical point of view the pair is testing the level of 1.3030 that it tried to break through in the middle of May. The level seems quite strong, and the correction may start from it to the levels of 1.2800 (middle line of Bollinger Bands) and 1.2680 (Fibo correction 23.6% for the long-term trend). Growth may continue if the price consolidates above May maximums and the level of 1.3100 (Fibo correction 38,2%). In this case the pair may grow to 1.3240 and 1.3450. Technical indicators show opposing signals. MACD histogram has moved to the positive zone, and Stochastic begins to reverse in the overbought zone.

Support levels: 1.2950, 1.2800, 1.2680.

Resistance levels: 1.3030, 1.3100, 1.3240, 1.3450.

Trading tips

In this current situation short positions may be opened from the level of 1.2950 with targets at 1.2800, 1.2680 and stop-loss at 1.3000. If the price consolidates above 1.3100, long positions may be opened with targets at 1.3220, 1.3450 and stop-loss at 1.3060.