Since the beginning of the year – a mere 20 trading days , the British Pound has gained almost 700 pips against the US dollar and looked set to continue its upwards trajectory with a move back to re-test the November 2010 high of USD1.6299. That is, until yesterday when the UK GDP figures were announced and as forex traders we were all given a masterclass into how an extreme piece of fundamental news was used by the professional money to shake Sterling longs out of the market whilst at the same time reinforcing the importance of how key technical levels can be affected by such releases. The markets had been expecting GDP to come in at 0.5% but when the actual came in at -0.5% it was hardly a surprise to see the pound dollar fall by almost 200 pips.
Once the excitement had died down yesterday’s low did manage to find strong support from the key 100 day moving average and this technical indicator has once again provided solid support in this morning’s trading with the pair breaking and holding above the 50% fib retrace level at USD1.5815 and, as such both these signals suggest a recovery and move towards the 38.2% level at USD1.5927. Any break and hold above this point would then open the way for a re-test of the USD1.6023 region in due course. Below, the 200 day moving average continues to provide excellent support to the downside and provided we breach the potential resistance in the USD1.5953 area we should see a further recovery in the pound dollar and the continuation of the upwards trend in due course. The pair was given a further boost this morning following release of the MPC minutes which confirmed that 2 members of the committee are now calling for a rise in UK interest rates.
Why not join me in one of my FREE live training rooms – I look forward to seeing you there – Anna