Forex Technical Update
GBP/USD Chart Weekly 6/03/2012 8:30PM EDT<
The GBP/USD has been bearish since the end of April and throughout May a 5-weeky drop from the 4/29 high of 1.53. We are now trading around the 1.53 area, near 1.5350 as the 6/4 trading week begins.
Looking at the weekly chart we see that the bias is bearish as the market trades under the 200-week simple moving average. However, the lower moving averages period 100 down to 8 show more of a flat market since summer of 2010.
These conditions do bring up the scenario of a bounce from the multi-year support, which goes down to 1.5240, going back to May 2010.
GBP/USD Chart Daily 6/03/2012 8:37PM EDT<<
We don't have any sign of stopping yet, except for a very subtle clue int he daily chart with the presence of a spinning top on the daily candle of 6/1. If we can get an engulfing candle to the upside (one that at least closes above 1.64 ie 1.6450) to start the week, there would be a stronger case for a bounce.
For now, the maximum target to the upside for this correction scenario should be limited to 1.56, a previous support pivot. We should also monitor short moving averages such as the 8-period SMA, which has provided resistance in this sharp month-long decline. Price is likely to meet this 8-SMA around 1.5520-1.5530 if the GBP/USD is to recover a bit the next few global sessions
Fed and BoE Watch:
US - From the USD side, the market is on Fed watch with high sensitivity because of 3-straight months of poor and declining Jobs data. Friday's NFP release of 69K for May, came after a downwardly revised 77K for April and a 120K for March. The unemployment rate also rose to 8.2%, bucking a trend of slowly retreating jobless rate from 9.2% in July 2011.
Bernanke testifies on Thursday and might give the market a clue to whether monetary stimulus will be applied, and which flavor (ie. QE, Operation Twist?). QE would probably have a more negative effect on the USD, and give at least half a reason for the GBP/USD to find support.
<< - There is also a Bank of England watch. The narrative has changed in that QE is back on the table after inflation appears to be declining and the economy is in a technical recession.
The Monetary Policy Committee for the BoE will meet on Thursday and announce its policy intentions, and drop clues on how close or not they are to QE.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of rex News, Analysis, Education, Videos, Charts, and other trading resources.
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