Technical and fundamental story sends pair lower
The GBPUSD got a triple shot with a negative inflation reading in the UK (-0.1% for YoY), a better US housing number, and a move back below the 200 day MA (green line in the chart below at the 1.5605 level). The pair moved above the 200 day MA last week. It was the first break above the key MA since August 2014. It was fun while it lasted (5 trading days). The high peaked at 1.5813.
The sharp fall has seen traders find a temporary bottom for now at least. Looking at the hourly chart, the move up from the corrective lows on May 4 and May 5 has the 50% come in at the 1.54505 level. The low extended to 1.5446 before getting a bounce higher.
How far can a correction go? If you look at the 5 minute chart, the move off the low is stalling against the 38.2% retracement of the move down. The 100 bar moving averageis not that far away at 1.5541 currently (and moving lower). This too should help cap the upside. If the price moves above, the waters get a little more muddy at least intraday.
Yes there is support at the 50% that has slowed the fall, but the breaking back below the 200 day MA was a significant move today. That is likely to keep traders looking more toward selling opportunities on rallies.
