Talking Points
GBPUSD risks correction with break below May opening range
Critical support 1.6722/54
Major event risk on tap from UK & US
GBPUSD Daily Chart
Chart Created Using FXCM Marketscope 2.0
Technical Outlook
GBPUSD testing Fibonacci support / monthly opening range low 1.6820/26
May opening range high at 1.6995
Break to validate monthly bias
Downside break targets key channel support at 1.6722/54- bullish invalidation
Topside breach targets objectives at 1.7040/65
Daily RSI support trigger break last week- bearish
50-RSI support trigger pending
Event Risk Ahead: UK Quarterly Inflation Report Wednesday morning, US Consumer Price Index (CPI) Thursday and housing data & University of Michigan Confidence report on Friday
GBPUSD Scalp Chart
Notes: Since our last GBPUSD update on March 26th, the pair has taken out all of our topside objectives, the last of which held as resistance 1.6890. Note that the high came in at the R1 monthly pivot at 1.6995 and a breach above this level targets a more critical resistance around 1.7040/64. That said, the pair now looks vulnerable as we test the may opening range low at 1.6820 and break/close below this level shifts the monthly bias to the downside for the pair.
Key support rests at 1.6722/54 – a region defined by a confluence of longer-term Fibs and operative channel support dating back to the November lows. A move below this zone would suggest that a more important high was put in place this month and while this is not our base case scenario, it highlights the significance of the upcoming support targets and its possible impact on our medium-term outlook.
Bottom line: look for a break of the weekly opening range heading into key event risk over the next 72-hours with a move below 1.6820 shifting our focus into the close of May trade. A rally surpassing the 1.69-handle would be needed to put topside scalps back into play targeting the monthly high and beyond. Note that near-term support and resistance triggers are pending heading into the close of US trade.
A few things to keep in mind: the ATR is tight and while this wouldn’t typically be our preferred setup the significance of the event risk ahead is likely to fuel a surge in volatility. The UK inflation report tomorrow and the US inflation figures on Thursday will be key here as prices hold this vulnerable position and could offer a catalyst for this setup. Note that the USDOLLAR index looks to be breaking out of a descending channel formation dating back to the yearly high and if 10,495 is overtaken, could see a renewed bout of USD support. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.
* 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
1.6865
23.6% Retracement
Bearish Invalidation
Daily / 30min
1.6902/10
Weekly ORH / 50% Retracement
Break Target 1
30min
1.6930
61.8% Retracement
Break Target 3
Daily / 30min
1.6959/70
78.6% Retracement / May, 2014 Close High
Break Target 4
Daily / 30min
1.6984/95
2009 Close High / 2014 Swing High / R1 Pivot
Break Target 5
Daily
1.7042/64
100% Ext(s) / 2009 Swing High
Support Target 1
Daily / 30min
1.6820/26
50%, 61.8% Ext(s) / Weekly ORL
Bullish Invalidation
30min
1.6790 – 1.68
61.8% Ext / 38.2% Retracement
Break Target 1
Daily / 30min
1.6722/54
61.8% & 100% Ext(s) / 50% & 88.6 Retrace(s)
Break Target 2
30min
1.6700
Soft Support / Big Figure
Break Target 3
Daily / 30min
1.6664/73
61.8% Retrace / April ORH / 138.2% Ext
Average True Range
Daily (20)
64
Profit Targets 15-17pips
*ORH: Opening Range High
*ORL: Opening Range Low
Other Setups in Play:
NZDJPY Monthly Opening Range Trade- Bearish Sub 89.50
EURAUD Scalp Setup Favors Selling Rallies Sub-1.5030
EURJPY Scalps Target Critical Support at 141
—Written by Michael Boutros, Currency Strategist with DailyFX
For updates on this scalp and more setups follow him on Twitter @MBForex
To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list
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Source: Daily fx