In this monthly chart you can see that the GBP reached the all time high a few weeks ago and then regressed back down a little. It looks like it is time for reversal. Notice the Fibonacci retracements. The 38.2 level is at around 1.96 which is also the resistance line at 2004-05. Notice that the RSI went above 70 and is now under which is a good sign for reversal (Just like it happened twice in 2004). Now it will probably take a few months to happen but I think traders should keep an eye out for it.
The GBP/USD is down into two-week lows heading into Friday’s London markets, near 1.3250 following Thursday’s intense drop-off.
The Sterling lifted on Thursday, climbing into 1.3446 following better-than-expected Retail Sales for the UK, but the bull ride was short-lived following a dovish showing from the European Central Bank’s Mario Draghi, who pushed out expectations of a rate hike for the EU into 2019. Markets recoiled at the news, reversing risk flows and sending traders piling into the Greenback.
The sell-off extended into the US session, with economic data for the US widely beating expectations, further driving the USD higher against the broader markets, and the GBP is slumping heading into the end of the week.
Friday is dry for the GBP, and the USD sees mid-tier Industrial Production for May at 13:15 GMT (forecast 0.2%, prev. 0.7%) and the Baker Hughes Oil Rig Count at 17:00 GMT, which last came in at 852 which could impact oil fluctuations to cap off the week.
GBP/USD levels to watch
Friday will be a bitter session for the Sterling, which finds itself forced to attempt to crawl out of a hole that appeared out of nowhere, and as Denis Joeli Fatiaki noted in his GBP/USD analysis, “the Pound against the US dollar had the same fate as the Euro during the European session after ECB’s decision to slow down QE in September and put an end in December. The Pound fell from1.34466 and pierced through six major support points before finding temporary relief at 1.32567 support. The Pound is now trading at 1.3250, and will need to hold above that for any possibility of starting the recovery. Failure to hold at 1.32505 could see prices fall further to 1.32382.”