CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

GBPUSD Trading at Key Level

May 6, 2020 1:05 PM

GBP/USD Trading at Key Level

The Construction PMI earlier out of the UK was horrible. The reading was 8.2 vs an expectation of 22, and a reading of 39.3 for March.  This was the worst ever reading for the survey. Obviously, this was due to the (nearly) complete stoppage of work for the construction industry for the last month because of the coronavirus. 

GBP/USD had been falling since Friday.  On Thursday, the pair tested recent highs at 1.2643 only to reverse and move lower on Friday, which resulted in 2 failed breakout attempts above the 61.8% Fibonacci retracement level from the highs on March 9th to the lows on March 29th, near 1.2510.  Recall that there was a good deal of US Dollar selling into month end, which most likely contributed to the run higher in GBP/USD.  The pair is currently trading in a rising triangle formation, which would typically break to the upside.  However, GBP/USD is currently trading near the upward sloping trendline of the triangle and if price breaks lower, the pattern will be negated.

Source:  Tradingview, City Index

If GBP/USD does break lower, it sets up a possible double top.  The neckline would be the recent low from April 21st near 1.2250.  A break of the neckline would target 1.1860, which is near the 61.8% Fibonacci retracement level from the March 19th lows to the April 30th highs.  First resistance above is at 1.2400.

Source:  Tradingview, City Index

Conversely, if GBP/USD does hold the rising trendline and move higher above 1.2643, than the rising triangle pattern will have held and would target near 1.3550!  The psychological level of 1.3000 and the March 9th highs at 1.3210 would be next resistance levels above.

Source:  Tradingview, City Index

One very important factor to consider when looking at this pair is the Bank of England (BOE) interest rate decision meeting on Thursday.  As with other central banks, expectations are for unchanged.  The prevailing factors from the meeting with be statement (how dovish will they be?) and the guidance (when does the committee believe the economy will begin to get better?).  With the selloff the last few days in GBP/USD, it appears traders are looking for a more dovish tone.


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024