October, 2018 | AtoZMarkets.com - Sterling dropped below 1.32 early in the New York session after Chicago Fed chairman, Evans said the strength of the U.S economy requires slightly limited monetary policy. GBPUSD had earlier been resisted at 1.325.
The Pound has been on the bullish run this week. There has been an aura of optimism around the BREXIT. British Brexit minister Dominic Raab has reiterated his optimism about the success of the BREXIT deal. GBPUSD started today aiming to break above 1.325 but the resistance level was well held. Following the statement from the Chicago Fed president Evans that the U.S economy is doing well and a restrictive monetary policy is well justified, the Cable dropped below 1.32.
GBPUSD Technical Analysis and Important Levels
In the last update, when price broke above 1.3135, we expected it to advance further above the 1.321 resistance level. The chart below was used.
From 1.292, a new impulse wave rally is taking place. The drop from 1.318 was price reaction to the negative U.K data. The drop from 1.318 could continue to 1.308-1.3107 intraday Fib-ratio support (50-61.8% Fib-retracement of the 1.303-1.318 rally. Price is expected to continue upside afterwards. A break above 1.318 could see price aiming 1.329 after surpassing 1.321 resistance level. On the downside, 1.303 is the nearest support, if price drops below 1.308. A break below 1.303 will likely continue to the next support at 1.292.
The expected drop to the 50-61.8% Fibonacci zone didn't happen as price head up quickly to 1.32-1.325. It was rejected at 1.325 twice last week. Today, price retested 1.325 again. It was resisted and dropped quickly as shown in the chart below.
The rally from 1.292 to 1.325 looks corrective. A corrective zigzag pattern within a bullish channel. The drop from 1.325 is impulsive. If price should continue downside, below the channel, we might see 1.303-1.3 zone (which acted as a support twice last week) visited again. The BREXIT still pose the biggest risk for Sterling traders.
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