Key Highlights
- The British Pound formed a short-term top at 1.3612 and declined against the US Dollar.
- There is a contracting triangle forming with current support at 1.3500 on the 4-hours chart of GBP/USD.
- The pair must hold the 1.3480-1.3500 support in order to initiate a fresh upside move.
- Today, the UK’s Industrial Production for Nov 2017 will be released, which is forecasted to increase by 0.3% (MoM).
GBPUSD Technical Analysis
The British Pound traded higher during the start of January 2018 against the US Dollar. The GBP/USD pair traded as high as 1.3612 before starting a downside correction.
During the mentioned correction, the pair broke the 1.3600 and 1.3550 support levels. The pair even settled below the 23.6% Fib retracement level of the last wave from the 1.3347 low to 1.3612 high.
However, the downside move was contained by the 1.3500 support area. More importantly, the 50% Fib retracement level of the last wave from the 1.3347 low to 1.3612 high is at 1.3480. Therefore, the 1.3480 and 1.3500 support levels are significant for the next move in GBP/USD.
At present, it seems like there is a contracting triangle forming with support at 1.3500 on the 4-hours chart. Should there be a break of 1.3500 followed by a close below 1.3480, the pair could accelerate declines toward the 1.3440 level.
On the flip side, the triangle resistance is at 1.3560. A successful break of 1.3560 would open the doors for a fresh rally towards or above 1.3600.
Today’s Industrial Production release for Nov 2017 in the UK may impact the next move in GBP/USD either above 1.3560 or below 1.3480. The market is looking for an increase of 0.3% compared with the previous month.
If the actual beats the forecast, GBP/USD could gain traction and move above 1.3560. On the other hand, disappointing figures will most likely put a lot of pressure on buyers. In the second case, GBP/USD could break the 1.3480 support for more losses toward 1.3440 and 1.3400.
