The dollar has settled off the highs it saw in the wake of the FOMC minutes release yesterday, which showed members to be contemplating the impact of the tax cut, which was seen as having scope to raise consumption and capex. GBPUSD gave back yesterday, Tuesday’s gains by bottoming to 1.3494 after the peak seen t 1.3612. Today the general U.S. dollar weakness continues, with the pair traded higher again, despite the slightly firmer than expected UK December Services PMI. UK December services PMI came in expectations at 54.2 in the headline reading, recovering from the dip seen in the month prior to 53.8.The details of the report showed that new business fell to its lowest reading since August, and input price inflation rose to a three-month high. The Eurozone final Dec services and the composite PMI’s signal strongest growth since 2011.
The Cable moved 30 pips higher in the last 4-hour session, breaking the 20-period MA, while it manage to held the last 2 Days above the 1.3470-1.6485 support area ( confluence of Daily Pivot analysis as well). The pair seen rally since December 26, with yesterday’s move to be consider just a correction move, with further gains to come , since the pair remains in long-term positive, in the upper Bollinger Bands pattern and close to 2017’s highs. Only a reversal lower , below the 1.3470 but importantly below the 20-DMA and S2 at 1.3425, could suggest that positive momentum is reaching to an end. Hence a daily close below 1.3500 would build the case for a shift in directional bias to the downside.
Intra-day however, a significant level is the round level at 1.3500. A break below that level, could suggest a retesting of yesterday’s lows and the S1 at 1.3470. The pair is currently moving above the pivot level and the hourly 50-EMA. Momentum indicators remain positive configured in the Daily timeframe, and intraday as well, after yesterday’s deep. The 4-hour RSI holds above neutral, and MACD lines remain positive however the lines point lower, reflecting a downside pressure.The stochastic turned above 20, but only a break above 50, could confirm that corrective mode will not continue.
Nevertheless, an intraday Long position was taken at 20-period MA, at 1.3540, with T1 slightly below S1 at 1.3585 and T2 at 1.3600. The support was set at 1.3490.
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