The GBPUSD is down sharply after the BOE cut the forecast for inflation and growth in their recent Inflation Report released earlier today. Employment data showed the Unemployment rate staying steady at 6%, Jobless claims fall by -20.4K vs -20K estimate and Employment change showing a 112K increase vs 125K estimate. Weekly average Earnings (3M/YoY) rose to 1% from 0.7% but still remain low.
GBPUSD has trended lower in trading today falling below 200 hour MA (green line), trend line and 100 hour MA (blue line and RISK level for shorts now).
Looking at the hourly chart the pair had difficulty trading with momentum above the 200 hour MA and 38.2% retracement of the move down from the October 28th high to the low reached on November 7th. The subsequent tumble on the Inflation report, took the price back below the 200 hour MA (green line) and the 100 hour MA (blue line at 1.58698 currently – this is a key RISK defining level for sellers now). The pair is looking down toward the low for the year/lowest level since September 2013 at the 1.5789 level as the next target. The low today comes in at 1.58107. There are a couple lows at that level over the last few hours of trading – so buyers may be taking some profit (see 5 minute chart below).
When a pair tumbles like the GBPUSD has done today, retracements are looked at as a test of the selling interest as well as the ability of the buyers to take back control. I will look for patient sellers today on rallies toward the 1.58599 level. This is the 38.2% of the trend move lower. The 100 hour MA is currently at the 1.58699 level. The 50% is at 1.58752. The price should not trade above the 50% (RISK for traders short).
The range today is 131 pips today which is above the 22 day average of 112 pips. So the double bottom may be showing a desire to slow things down a bit. This may give patient traders who missed the move an opportunity to sell on a retracement. Nevertheless, traders should be aware that the on a break of the low, the trend action seen today can continue with the low for 2014 the next target at 1.5788. So be careful.
Patient sellers will likely lean against the 38.2% of the trend move lower.
