The GBP/USD dropped significantly and erased the morning gains. Is trading in the red as the USD was lifted by the USDX’sbullish momentum. A further USDX’s increase will force the USD to drag the pair much lower on the short term. Price is still located in the buyer’s territory but has signaled an exhaustion.
GBP/USD failed to make new highs, showing an overbought on the Daily chart, but is premature to talk about a larger correction as the rate is located above an important dynamic support. Will be very important to see how the USDX will react ahead of the FOMC Meeting, the Federal Reserve is expected to hike the rate once again, which will make the dollar stronger.
A disappointment on Wednesday will ruin the USD, which will depreciate versus all its rivals. The pair dropped significantly on the UK’s mixed data, the Manufacturing Production rose by 0.1% in October, matching the 0.1% estimate, while the Goods Trade Balance has come in better than expected, it was reported at -10.8B, much above the -11.5B estimate. The Construction Output dropped by 1.7% in October, even if the traders have expected to see a 0.2% increase, the Consumer Inflation Expectations surged by 2.9%, while the Industrial Production increased by 0.0%, matching expectations.
The rate dropped significantly today and erased the yesterday’s gains. Price failed to reach and retest the 1.3549 previous highs and now it should reach the second warning line (wl2) of the ascending pitchfork. You can see that the warning line represents a strong dynamic support, only a valid breakdown will signal and confirm a drop at least till the median line (ml) of the minor blue descending pitchfork and towards the 1.3046 static support. Support can be found lower at the sliding line (SL) of the major descending pitchfork and at the lower median line (lml). Technically, only a valid breakout above the 1.3527 level will signal a further increase , but is less likely to happen at this moment. i believe that only the fundamental factors will force it to turn to the upside again.