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For those of you who joined my FX Street webinar this morning then you may have noted that I pointed out a bearish divergence between GBPUSD price action and the hourly MACD. Usually when this happens it signals a turn-around in price action. Indeed, as we have progressed throughout the London session GBPUSD has sold off. The break below 1.5885 in GBPUSD was pivotal and triggered the move lower in price action in line with the MACD signal.
In fairness sterling hasn't sold off in isolation, EURUSD and AUDUSD have also followed suit, however the bearish divergence noted in GBPUSD hinted that the bulls were losing their grip on GBPUSD before the actual sell off occurred.
Going forward, this cross is likely to be driven by the outcome of 1, the ECB meeting and 2, the NFP reading on Friday. Tomorrow's service sector PMI reading from the UK could also cause some volatility as an upside or downside surprise to the consensus expectation of 51.2 for August may cause a bout of short-term volatility in this cross.
The hourly MACD suggests there could be some further downside to come as this indicator is not in oversold territory yet. 1.5850 then 1.5835 - the Tenkan line on the daily Ichimoku cloud - are both key support levels ahead of 1.58. While 1.5905 - a double top on the hourly chart - is key near-term resistance.
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GBPUSD: Hourly chart
Kathleen Brooks| Research Director UK EMEA | FOREX.com
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