Raced to the 61.8% (and Wednesday high) on Farage concession
The GBPUSD was correcting higher in early European trading today and weathered the slightly weaker GDP and Industrial production/manufacturing production data.
Then the pair rocketed even higher after Brexit Party leader Farage said he would step aside in Conservative seats elections. The hope is that it avoids a hung parliament.
Having said that, YouGov is out with a comment now saying that the move is not much of a game changer for the elections. Time will tell, but the GBPUSD has moved off session highs.
In the run higher, the pair did quickly move above its 100 hour moving average 1.2839 (blue line) and its 200 hour moving average at 1.28791 (green line). The price moved to a high price of 1.2896 which is right where the 61.8% retracement is found. The levels also the high price from last Wednesday's trading (see red numbered circles).
The price has move back below its 200 hour moving average at 1.28791. That moving average will be a barometer for the bulls and bears now. If the price can manage to stay below, the bears hang on to some hope for the story to fade. If the price moves above, we could see more short covering in the retest of that 61.8% retracement level.
The biggest fear for the UK election is a hung parliament and more Brexit stalemate. The Brexit Party is more aligned with the Tories, so stepping down in the elections may have helped Tories a little in the close elections vs Labour. However, as YouGov points out (and Justin also brought up in an earlier post), it might not be the game changer that was originally thought.
Nevertheless, the news did muddy the water technically with the move above the 100 hour MA, 38.2%, 50% and 200 hour MA. Some of those moves are being walked back (below the 200 hour MA and trading above and below the 50%) but shorts and longs have more of an even fight now technically.
Now that the price action has settled, traders will be using that 200 hour MA as a barometer. Momentum moves back above, could see more short covering. Stay below might give the sellers more hope and shake out the news buyers. In which case, a rotation back toward the broken 38.2% retracement at 1.28471, and the 100 hour moving average at 1.2839 is not out of the question. The initial fireworks are over. Now the market has to decide, does the intraday trend continue, or has the price gone enough?
