Trades near a ceiling area
The GBPUSD had a near-epic day yesterday as it bounced around in a 75 pips trading range up and down and up and down. The floor at the 1.5560-645 area gave way in the Asia-Pacific session on to find support at the July 28 low of 1.5521. That was enough technical perspective, to get buyers back involved. The price extended back above the 1.5560/64 area than what was resistance became support again.
In the London morning session, weaker service PMI provided a hiccup the rally, but the buyers stepped in against the 1.5560/64 level and it has been up, up and away since then. Currently there is testing another swing area where there have been a number of swing highs over the last few weeks. That level comes between the 1.5636 – 44 area(see top yellow area in the chart above). Since July 23 have been 3 attempts to extend higher – each failing. Meanwhile going back to July 22, there have been 6 or so swing highs that have stalled the rally. Sellers should enter here (or at least some profit taking), with stops above the 1.5644. Risk can be defined and limited. Of course the volatility of late is the wildcard for this pair. So keep risk to minimum.
On the downside, the targets come in at the 1.5597-12 area. The 1.5603-12 is the 38.2-50% of the last trend-like move higher. The 1.5597 is where the 100 hour moving average is currently found. If the price moves below these levels, with the volatility we've seen lately, you can expect anything.
PS The pair will also have a big day tomorrow with all the BOE action (see Mike's preview HERE). That also favors caution and potential illiquid summer time trading. So be careful.
