GBP/USD Testing Major Resistance; Strong Challenge For Bulls
Dwayne Buzzell | Jun 08, 2018 01:25PM ET
There has been a sharp fall in the GBP/USD pair after it hit the major resistance level at 1.43676. Though the pair didn’t exhibit any definite bearish reversal signal the aggressive traders managed to book a decent profit by shorting the cable in the global market. After the pair breached the major support level at 1.37555, the temporary double top formation of the pattern at 1.43676 was confirmed. Though the bears dominated the market, the bulls found some solid support after the pair hit the critical support level at 1.32047. This level was very crucial for the long-term investors since a daily closing of the price below that level would confirm the end of recent bullish correction.
GBP/USD Daily Chart Analysis
From the above figure, you can clearly see the pair has found some decent support at the critical level 1.32047. Most of the expert traders in the Forex market executed long orders with a tight stop just below the low of 29th may 2018. Currently, the pair is testing the major resistance level at 1.34786 and any bearish price action confirmation signal will be an excellent opportunity to short this pair. If the sellers manage to take control of the market from this level, the pair might again head towards the major support level at 1.32047. A daily closing of the price below that level will ultimately lead this pair towards the next major support level at 1.30237. This level is very crucial for the long-term investors and the sellers will have to work really hard since we have plenty of supportive candles down below this level.
On the upside, we need to clear the major resistance level at 1.34786 to establish fresh selling momentum in this pair. A daily closing of the price above the major resistance level at 1.34786 will ultimately lead this pair towards the nearest resistance level at 1.37555. From this level, the sellers will try to take control of this market since we have plenty of resistive candles just above that level. A clear break of the major resistance level at 1.37555 will eventually lead this pair towards the key resistance level at 1.43738.
Fundamental Factors
The recent performance of the US economy is showing a great sign of recovery. The last NFP data release was extremely positive followed by a significant boost in the average hourly income of the US citizen. If the US economy manages to retain such positive growth, a hawkish rate hike in this month is highly expected. According to the leading analyst, there is 87.5% chance the Fed officials will hike their interest rate on 14th June 2018. A hawkish rate hike from the Fed officials will give the US dollar index a significant boost. On the contrary, a dovish rate hike will create an extreme level of selling pressure in the US dollar index. The US dollar index which measures the overall value of the green buck’s strength against six major rivals is one of the key factors to assess the strength of trend in major pairs. A stronger dollar will wipe out the GBP/USD bulls from the market and will eliminate the current bullish recovery attempt. On the contrary, a weaker dollar will boost the slowdown the optimistic dollar bulls in the global market.
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Considering the fundamental factors, chances are very high we will see a hawkish rate hike from the Fed officials in the upcoming FOMC meeting minutes. However, any dovish statement from Fed Chair Person Jerome Powell will boost most of the major rivals. The technical data in the GBP/USD pair doesn’t give us any clear clue since we are still testing a major resistance level. However, a clear break of the currency resistance level prior to the FOMC meeting minute will suggest dovish rate hike from the Fed officials.
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