After moving lower in the London morning session, retracing 38.2% of the sharp move higher on Friday, the GBPUSD has ralllied back higher on the weaker than expected US Retail Sales. The 38.2% retracement level comes in at 1.55154 and the low came in at 1.5516. The 200 hour MA at the 1.5523 was also another level for traders to lean against on the downside and will now be stronger support going forward after the price rebound. Needless to say a move below each is needed to solicit more selling pressure in the pair going forward.
With the weaker than expected Retail Sales, however, focus is back to the upside for the pair. The price has moved above the 100 bar MA on the 5 minute chart (blue line) and is currently testing the 200 bar MA (green line) on the same chart. The weaker Retail Sales has traders on the defensive that Bernanke will be speak about QE3 when he testifies tomorrow/this week on Capital Hill. Estimates for 2nd quarter GDP are also likely to be reduced (some estimates have 2nd quarter GDP now in the 1.2% range). A move above the 200 bar MA at the 1.5561 level opens the door for a test of the highs and topside trend line on the daily chart at the 1.5597 (see chart below). A move above 1.1.5597 will next target 1.5618 and then the 38.2% of the move down from the May high to the June 1 low at the 1.56613 level (see hourly chart below).
The buyers are back in control it seems. I would expect dip buyers to lean against a stop at the 1.5547 level (100 bar MA on the 5 minute chart currently)
