Talking Points
October price action continues to suggest bearish bias is warranted- pair now at key support
Risks to our near-term bias on improving UK data, channel support
Key near-term support at 1.5918- scalp bias at risk above this threshold
GBPUSD Daily Chart
Chart Created Using FXCM Marketscope 2.0
Technical Outlook
GBPUSD October opening range break keeps focus on the short side
Now testing operative channel support dating back to July low
Key interim support remains 1.5918- Break targets objectives at 1.5780 & 1.5707
Pending RSI Trigger break below 50 to offer further conviction
Interim resistance 1.61- backed by 1.6202 & 1.6253
Scalp bias turns neutral above 1.6050- Bullish above 1.6120 (last week’s high)
Key Events Ahead: UK September Retail Sales & US Debt Ceiling / Gov’t Shutdown debate
GBPUSD Scalp Chart
Notes: I’ve been in and out of the pound on the short side for the majority of the week as we test the 1.5918/22 support range. The last attempt penetrated into the 1.59- handle before mounting a 70 pip rally off the lows into former support at 1.5965. While some of the move can be attributed to the ongoing headlines coming out of Washington, it should be respected and we will continue to favor selling into resistance with RSI conviction as long as we hold below the weekly range high / channel resistance. A clear break below (and close) 1.5918 looks to target subsequent support objectives.
Two important things I think we should keep in mind here; 1- Strong UK data, including unemployment, housing and inflation, have been unable to halt the broader decline off the October high (made on October 1st*) suggesting that momentum remains heavy in the near-term. 2- The reversal off the high was at a key technical level; 1.6253 is the highest close of the year made on January 2nd (Oct high 1.6259) with the nature of the decline exemplifying notable structure. That said, we are at support and a reversal back above last week’s highs shifts the near-term focus back to the topside with a break above the monthly highs challenging trendline resistance dating back to the 2009 high, currently just shy of the 1.63-handle.
* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.
Key Threshold Grid
Entry/Exit Targets
Timeframe
Level
Significance
Resistance Target 1
30min
1.5965
61.8% Fib Ext
Resistance Target 2
30min
1.60
Soft Resistance / Pivot
Bearish Invalidation
30min
1.6030
38.2% Retracement
Break Target 1
30min
1.6071
50% Retracement
Break Target 2
Daily / 30min
1.61 – 1.6114
Big Figure / 61.8% Retracement
Break Target 3
30min
1.6145
Mid-Sept High / Soft Resistance / Pivot
Break Target 4
Daily / 30min
1.6202
88.6% Retracement
Break Target 5
Daily
1.6253
2013 Close High (Jan) / October High
Support Target 1
Daily / 30min
1.5918/22
78.6% Fib Ext / 23.6% Retracement
Bullish Invalidation
30min
1.5890
Monthly Low / Soft Support
Break Target 1
30min
1.5867
100% Fib Extension
Break Target 2
30min
1.5830
Soft Support / Pivot
Break Target 3
Daily / 30min
1.5782
61.8% Retracement / Pivot
Break Target 4
Daily
1.5750
June High / Soft Support
Break Target 5
Daily / 30min
1.5707/10
1.618& Fib Ext / 38.2% Retracement
Average True Range
Daily
103
Profit Targets 24-26pips
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—Written by Michael Boutros, Currency Strategist with DailyFX
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