12 May 2015
Forex: GBP/USD vulnerable to a short-term correction – Rabobank
FXStreet (Barcelona) - With technical indicators signalling that GBP/USD gains remain stretched, and US retail sales data tomorrow expected to increase, the pair might witness a correction lower towards 1.54 levels, explains Piotr Matys of Rabobank.
Key Quotes
“GBP/USD rallied to 1.5498 high on April 29. On that day the RSI increased to 72.2141 before a pullback to 1.5090~ low unfolded at the beginning of May. In other words, with the RSI above the 70 level, there is a risk of a correction or at least consolidation, which would keep the December 2014 high at 1.5786 out of reach (at least in the short-term).”
“A sharp pullback below the support area formed by the February 26 high at 1.5552 and the 1.55~ threshold is required to shift the short-term focus to lower levels with 1.54~ as a potential target. Such a correction could be triggered by US retail sales due on Wednesday.”
“The market expects a fairly modest headline increase of 0.2% in April from 0.9% in March and 0.6% excluding auto and gas. Far stronger than expected retail sales would catch many market players long GBP/USD.”
“That said, one set of data is unlikely to seriously undermine the upside trend in GBP/USD, which has been in place since the middle of April.”
“To bring back into focus the year-to-date low at 1.4566, US data may have to surprise on the upside throughout Q2.”
Key Quotes
“GBP/USD rallied to 1.5498 high on April 29. On that day the RSI increased to 72.2141 before a pullback to 1.5090~ low unfolded at the beginning of May. In other words, with the RSI above the 70 level, there is a risk of a correction or at least consolidation, which would keep the December 2014 high at 1.5786 out of reach (at least in the short-term).”
“A sharp pullback below the support area formed by the February 26 high at 1.5552 and the 1.55~ threshold is required to shift the short-term focus to lower levels with 1.54~ as a potential target. Such a correction could be triggered by US retail sales due on Wednesday.”
“The market expects a fairly modest headline increase of 0.2% in April from 0.9% in March and 0.6% excluding auto and gas. Far stronger than expected retail sales would catch many market players long GBP/USD.”
“That said, one set of data is unlikely to seriously undermine the upside trend in GBP/USD, which has been in place since the middle of April.”
“To bring back into focus the year-to-date low at 1.4566, US data may have to surprise on the upside throughout Q2.”