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GBP/USD Forecast: could drop to 1.34 mark once 1.3480 confluence support is broken

Written by Haresh Menghani | 2018-01-11 06:30:57 GMT

The pair dropped below the key 1.3500 psychological mark in reaction to disappointing trade balance data but managed to rebound sharply in wake of a broad-based USD sell-off following a report that China is considering slowing or halting its purchases of the US Treasuries. A Chinese government source, however, clarified on Thursday that media reports could be based on wrong information. 

Yesterday's up-move turned out to be short-lived and was utilized as initiating fresh short positions, despite better-than-expected NIESR GDP estimate for the three months to December. Currently struggling near the 1.3500 handle, traders now look forward to the release of PPI figures and the usual weekly jobless claims from the US for fresh impetus. In the meantime, the BOE's Credit Conditions Survey report might influence the sentiment surrounding the British Pound and provide some short-term trading opportunities.

Technically, the pair is placed closer o an important confluence support near the 1.3480 region, comprising of a short-term descending trend-line resistance break-point and 23.6% Fibonacci retracement level of 1.3062-1.3613 recent up-move. A convincing break below the mentioned support is likely to accelerate the fall towards 38.2% Fibonacci retracement level near the 1.3400 handle with some intermediate support near the 1.3435-30 region.

On the upside, any attempted up-move now seems to confront immediate resistance near 1.3525 level and is followed by a strong horizontal hurdle near the 1.3560-65 region. Momentum above the mentioned barriers could get extended back towards the 1.3600-10 region, above which a bout of short-covering has the potential to lift the pair back towards 2017 yearly highs resistance near the 1.3655-60 region, touched in September.


Haresh Menghani

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