- September 27, 2019
- Posted by: cabana-admin
- Category: Market Insights
Overview:- The GBP/USD pair retained the negative tone seen on previous updates, extending its weekly decline to 1.2302, its lowest in two weeks. By analyzing the daily chart we can see that bears are leading and playing at front foot. The pair could not sustain above 1.2500 level and after arriving at 1.2588 level it slipped down to 1.2302 level yesterday which indicates that downside risk is not over yet.
Fundamental Analysis:- The UK didn’t release macroeconomic data, but the never-ending Brexit drama continued. After resuming activity following a short-lived suspension, the UK Parliament criticized PM Johnson’s combative language but continues to lack consensus on what to do news with Brexit. A spokesman for the of the PM said this Thursday that they had a very long way to go to secure a Brexit deal with the European Union, adding to the ongoing uncertainty. Meanwhile, the Fitch rating agency said that a ‘no-deal’ Brexit would put significant short-term pressure on the UK corporate sector amid possible disruption at borders, weaken Sterling and push the kingdom into recession.
During the upcoming Asian session, the UK will release the September GFK Consumer Confidence Index, foreseen at -14, matching August figure. There’s no other figure scheduled for release this Friday.
The GBP/USD pair is seesawing around the 38.2% retracement of the rally measured between 1.1957 and 1.2581 and seems that buyers are struggling to defend the area. Technical readings in the 4 hours chart keep the risk skewed to the downside, as the pair is developing below its 20 and 100 SMA, with the shorter accelerating its decline above the larger one. The 200 SMA converges with the 50% retracement of the same advance at 1.2270, while technical indicators remain within negative levels, the Momentum heading firmly lower and the RSI barely recovering from oversold levels, this last, falling short of suggesting an upcoming advance. The key is the mentioned 1.2270 level, as if the pair breaks below it, a steeper decline could be expected. A bearish marabuzo candlestick followed by another small red candle on the daily chart is generating further bearish signal and it seems like it is just a starting further picture is still awaited. Downside risk is not over yet we will get further bearish confirmation once pair trades and settles below 1.2300. On contrary a daily closing above 1.2500 level will change the outlook from bearish to bullish and it will open the way towards the 1.2750 and furthermore. A bearish crossover on MACD indicator is providing us bearish signal and RSI also arrived below 50 level which is providing us bearish signal for the time being.
What next:- Overall pair is trading and moving below the moving average (9,14,50 EMA) lines and today’s closing matter a lot if today bears take the charge and settles below 1.2300 level then we may see further weakness in the pair and if pair give positive closing and cover all the losses then we may see further buying till 1.2500 level first and furthermore.
Trade idea:- Based on chart and studies above we can suggest that sell the pair below 1.2300 target is 1.2250 and 1.2200 sl is 1.2400 level. The 1.2500 level is immediate resistance level followed by 1.2600 whereas 1.2200 level is strong key support level followed by 1.2100 level.