GBPUSD survived a test of critical support yesterday, but may not be so lucky next time around. As volatility is likely to heat up in coming weeks.
GBPUSD tested below key support yesterday, but managed to rally strongly in response, at least partially dragged higher by all of the EURUSD buying, though EURGBP was also rallying yesterday, which has kept a bit of a lid on GBPUSD recently.
While the recent break higher in GBPUSD and successful test of key support may look promising for bulls here – after all we did see an impressive pattern reversal yesterday – the days up here above 1.5750/1.5800 are likely to be numbered as GBP tends to underperform the USD when volatility begins ticking higher. On that account, with a key set of event risks set to get underway this Friday with the Bernanke speech at Jackson Hole and then continuing next week and in the weeks ahead with key EU risks, GBPUSD may find itself back in the lower range below the 200-day moving average as volatility pulls higher. The tip-off that a new run toward 1.5300 may be in the cards will of course be a return below the support line below 1.5800 that was tested yesterday.
Chart: GBPUSD
GBPUSD survived its test of support yesterday, but a move back below the 1.5775 area support and especially the 200-day moving average(black line) somewhat lower would signal that the pair are ready to try back toward the low end of the longer term range down below 1.5300. Meanwhile, the recent 1.5900+ high is the key resistance for now.
John J Hardy,
SAXO BANK