GBP/USD Today – 2012/9/28
September 28, 2012 4:15 am in Forex Analysis
Today’s outlook for GBP/USD: The currency pair had gone down as low as 1.6137 but found support just above the 22-day EMA (yellow line in the daily chart below). The strong jump from that support took GBP/USD to 1.6258. Please note that the recent high was 1.6309 which was slightly higher than the previous high of April 30th i.e. 1.6301.
GBP/USD Daily Chart:
1) Some optimism in Euro zone because of slight development in Greece and Spain about the budget cuts. Please check the post EUR/USD Today for the details. Positive sentiments in Euro zone affect GBP/USD also. Please note that though last one year’s average correlation between GBP/USD and EUR/USD has been +0.68 but during last one month the positive correlation became quite strong and the average correlation value of these 2 currency pairs has been 0.97. During past week it dropped down to 0.52. We expect it to normalize soon. And that means either GBP/USD should have some downward consolidation while EUR/USD moves up or vice versa.
2) UK economic releases: No change in year-on-year GDP which remained as -0.5% but quarter on quarter GDP change (-0.4%) was better than the consensus and previous -0.5%. The current account report was quite negative with GBP -20.8B against the consensus of -12.4B and previous -15.4B. The total business investment improved drastically to 3.1% against expected 1.7% and previous 1.9%. Gfk consumer confidence also improved slightly to -28 from previous -29.
3) US economic releases: The reports about durable goods orders came quite weak but the reports about jobless claims were slightly positive.
What to expect from GBP/USD today:
Overall near-term outlook stays bullish but such a strong upward gains should bring some consolidation soon. One of the point to be noted that as mentioned above, the recent high had broken over the previous high of April 30th and though GBP/USD could not sustain above that level but the break of the previous high shows some bullish sentiments. Another supporting factor is that the consolidation from the recent high was not much and the support came from just above 22-day EMA level.
On the other hand even if the recent high was slightly higher than the previous 1.6301 but the difference was just 8 pips and also the currency pair did not sustain there for any considerable period. Considering this a strong break above 1.6309/1.6310 is critical to expect any substantial gains towards the next psychological level of 1.6500. The chances are good for that and that is indicated by the following weekly chart of GBP/USD. The pair is quite close to the mid-term upper trend line resistance and should test that level.
GBP/USD Weekly Chart:
But a failure to break over 1.6310 should bring downward consolidation first towards the recent 1.6137 and then possible 1.6000 i.e. towards 55-day EMA support. In fact such a move may take GBP/USD further towards 1.5950/1.5960 i.e. 38.2% retracement zone as shown in the daily chart above.