Forex Technical Update
GBP/USD 4H Chart 5/14/2012 9:40AM EDT
The Sterling has been resilient some treating it as a safe haven amidst uncertainty in the Eurozone. It has been sliding against the USD, but not as much as other currencies such as the EUR or AUD. The 4H chart shows the market holding above the 200 simple moving average. It is also important to note that the pair holds a bullish stance unless it breaks below 1.60 and the rising trendline that goes back to the 2012 low of 1.5240 established in January.
Whatever strength GBP has is however dominated by the strength in the USD due to risk aversion. But if the current bout of risk aversion to start this week does not turn into panic, the GBP/USD has a chance to pop up toward the 1.6160 pivot in any short-term bout of risk appetite or stabilization. The next resistance above 1.6160 is a declining trendline which should meet price in the 1.6250-1.6280 area.
Risk Event: The key risk event is Wednesday's Quarterly BoE Inflation Report, where the market will be monitoring Mervyn King's press conference for clues on QE. The current strength of GBP can be lost if there is mention of the poor Q1 GDP as grounds for stimulus. Instead, if focus is on controlling inflation, the GBP should continue to be resilient, waiting for the moment the USD falters.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.