Cable finds Temporary Support After DXY Pullback
- The GBP/USD pair bounced back as the Dollar Index plunged.
- The price could come back to test and retest the immediate resistance levels before dropping deeper.
- A temporary rebound could see pair catch new downside movements.
Our GBP/USD forecast sees the pair rebounding after its sell-off. It traded at 1.3487 yesterday, far above 1.3424 Wednesday’s low and is currently priced at 1.3513 by forex brokers.
The current rebound is natural and it was to be expected after the most recent sell-off.
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The price bounced back after reaching a dynamic support and after the Dollar Index (DXY) started to drop. DXY’s retreat was natural after an amazing rally, but this could be only a temporary one, so the GBP/USD maintains a bearish bias.
On Thursday, the UK Current Account was reported at -8.6B far above the -15.8B estimate and higher versus -8.9B in the previous reporting period, while the Final GDP rose by 5.5% versus 4.8% expected.
Furthermore, the Nationwide HPI registered only a 0.1% growth versus 0.6% forecast, while the Revised Business Investment surged by 4.5% beating the 2.4% estimates.
The greenback lost significant ground after some poor US economic data and around the Powell and Yellen speeches before the Committee on Financial Services.
Unfortunately for the USD, the Unemployment Claims jumped higher unexpectedly from 351K to 362K, even if the traders had expected the indicator to drop to 333K. Also, the Chicago PMI was reported worse than expected at 64.7 points below 64.9 points estimates.
The US Final GDP rose by 6.7% exceeding 6.6% forecasts, while the Final GDP Price Index has come in line with expectations.
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GBP/USD forecast: Price Technical Analysis – Dynamic Support
The GBP/USD pair found support on the descending pitchfork’s upper median line (UML) and now it tries to recover after the most recent sell-off.
Now it is pressuring the 1.3481 resistance, the support has turned into resistance. Jumping and stabilizing above it may signal further growth towards the 150% Fibonacci line of the descending pitchfork.
Failing to approach and reach the weekly S3 (1.3392) signals that the GBP/USD pair could come back higher towards the S2 (1.3533).
It could drop again if it stays below the 150% Fibonacci line. Also, the 1.3571 is seen as a strong upside obstacle.
Personally, I believe that only a valid breakout through the warning line (wl1) could announce a bullish reversal.
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