GBP/USD Tests Major Support As Sellers Remain In Control

The Great Britain Pound (GBP) extended downside movement against the US Dollar (USD) on Wednesday, dragging the price of GBPUSD to less than 1.2150 following the release some key economic news. The technical bias remains bullish because of a higher low in the recent downside waves.

Technical Analysis

As of this writing, the pair is being traded near 1.2111. A hurdle may be noted around 1.2200, the confluence of psychological number as well as horizontal resistance area as demonstrated in the given below four-hour chart. A break and 4-hour closing above the 1.2200 resistance area shall incite renewed buying interest, validating a move towards the 1.2328 region.

On the downside, the pair is likely to find a support around 1.2100, the confluence of psychological number as well as swing low of the last major downside move. The technical bias shall remain bullish as long as the 1.1916 support area is intact.

UK Retail Sales

Like-for-like sales increased by 1% in December compared with the previous year, said the British Retail Consortium (BRC)-KPMG research. Food sales were the major contributor to the growth, with non-food sales sluggish, the BRC said. Supermarket chain Morrisons reported a 2.9% rise in like-for-like sales over the Christmas trading period. The retailer said it was its strongest performance for seven years.

Hawkish Fed

Boston Fed President Eric Rosengren on Monday called for the U.S. central bank to step up its pace of interest rate increases from the once-a-year pattern it has pursued since 2015, warning of inflation risks if it does not. “I expect that appropriate monetary policy will need to normalize more quickly than over the past year,” Rosengren told the Connecticut Business and Industry Association. At 4.7 percent, unemployment is at a level that is sustainable over the long run, he said, and inflation is on track to reach the Fed’s 2 percent target by the end of this year. If the unemployment rate falls further, he said, inflation could overshoot that target, “which would place the economic recovery at risk.

Trade Idea

Considering the overall technical and fundamental outlook, buying the pair around current levels appears to be good strategy in short and medium term. Alternatively selling the pair below the 1.2100 support can also be a good strategy.

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