BRITISH POUND SWINGS ON CPI, BREXIT HEADLINES
The big mover so far on the morning is the British Pound, which has caught pushes in both directions so far on the day. The first move in the currency after the Euro open was bullish, as prices jumped-higher upon the release of August inflation numbers. But shortly after that spike, negative Brexit headlines began to show and this helped to pull the currency back – and then some – so that we’ve already erased the entirety of the earlier-morning ramp. As we discussed earlier this month, Brexit headlines are likely going to continue to push prices in both directions. But – a bullish bias has continued to hold since the mid-August low came into play, and the big question is whether we see bulls defend the line as prices pull back.
GBP/USD HOURLY PRICE CHART: JUMP ON CPI REVERSES ON BREXIT HEADLINES
Chart prepared by James Stanley
We’ve been following the slow build of bullish price action around the British Pound since those mid-August lows came into play. What started as an apparent short-squeeze with overbought conditions has transitioned into a bullish near-term trend.
The low in August printed around the 23.6% Fibonacci retracement of the Brexit move, and this same Fibonacci study helped to mark the top in the pair in mid-April at the 78.6% marker. But last week saw the 38.2% retracement of this major move show up, and this rests at 1.3117. We were looking for bulls to pose a topside push above this level to prove continuation potential, after which the prospect of higher-low support can open the door for strategies around bullish continuation.
Well, now that we have the test above resistance, the prospect of higher-low support for bullish continuation plays can become attractive in the pair. There are two zones of interest that we’ve been following taken from recent price action: The nearby zone runs from 1.3034-1.3065 with a second zone just below the 1.3000 psychological level. One item of disconcert and a factor that may keep the prospect of a deeper retracement as a workable theme is the fact that this morning’s sell-off pushed prices below the aggressively bullish trend-line that’s built over the past two weeks. This may be part of a rising wedge formation, which will often be looked to for bearish reversal strategies. So – for those that do want to look at the long side, ensure that support is at a workable level with which risk can be properly managed – because given the pace of headlines around the British Pound, this thing can come back down just as quickly, if not more so, than it had moved higher.
