GBP/USD Low Volatility Period Ends, Reversal Scalp Faces 1.5450 Hurdle

Talking Points

  • GBP/USD reversal approaches initial key support target
  • Updated targets and invalidation levels

GBP/USD Weekly

GBP/USD Weekly Chart

GBP/USD Daily

GBP/USD Daily Chart

Technical Outlook

  • GBP/USD in the process of marking outside weekly reversal candle off the monthly high- bearish
  • Interim support confluence at 1.5447/59 backed by key support at 1.5332/58
  • Subsequent support at 1.52187/46
  • Key resistance at 1.5630- bearish invalidation
  • Daily RSI support-trigger break- bearish
  • Look for momentum support at 40- break below would reinforce short-bias
  • Key Event Risk on Tap- US 2Q GDP revision tomorrow and Carney Speech at Fed Symposium and UK 2Q GDP revision on Friday

GBP/USD 30min

GBP/USD 30min Chart

Notes: The pound has fallen more than 2.2% off the highs with the reversal broking the weekly opening range low as intraday momentum moved to its lowest levels since early July. Today’s decline marks the third largest this year with the sell-off now approaching the first region of key technical support at 1.5448/62. The immediate short-bias is at risk above this region with interim resistance seen at 1.5528 backed by our bearish invalidation level at the highlighted region into 1.5580.

Bottom line: We’ll be looking for to sell rallies / short triggers while below weekly trendline resistance with a breach above needed to shift the focus back towards the 1.57-handle. A break below support this targets subsequent objectives at 1.5420 backed by the July low-day close at 1.5358 and 1.5331. A quarter of the daily average true range (ATR) yields profit targets of 28-31pips per scalp. Caution is warranted heading into US and UK event risk later this week with the release of the 2Q GDP revisions and ongoing commentary form the Jackson Hole Fed Symposium likely to fuel added volatility in USD and GBP crosses.

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