GBPUSD Shorts at Risk Above 1.68 Heading Into BoE, Inflation Data

By DailyFx | Updated August 06, 2014 AAA

DailyFX.com -

Talking Points

  • GBPUSD August opening range takes shape above technical support
  • Possible inflection range 1.6809/25
  • Event risk on tap heading into next week

GBPUSD Daily Chart

GBPUSD Shorts at Risk Above 1.68 Heading Into BoE, Inflation Data

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • GBPUSD holding key support / August ORL 1.6808/26- bullish invalidation
  • Key resistance / August ORH 1.6890-1.6900- bearish invalidation
  • Resistance breach targets objectives at 1.6984-1.7000, 1.7045/65
  • Support-break targets 1.6738/54, 1.6692
  • Daily RSI resistance-trigger pending
  • Event Risk Ahead: BoE Rate Decision tomorrow, Trade Balance on Friday

GBPUSD 30min Chart

GBPUSD Shorts at Risk Above 1.68 Heading Into BoE, Inflation Data

Notes: The break below 1.7065 last month shifted our bias to the short side of the pound with the subsequent sell-off now bringing the pair into key support at 1.6809/25. The August opening range is taking shape just above and with momentum in the greenback starting to wane the sterling is at risk for a near-term recovery higher.

The pair has been carving out a well-defined weekly/monthly opening range between 1.6809 and the 1.69-handle and we’ll look for a breach of this zone to validate near-term directional bias while noting a preference to buy dips while above 1.6809. A break below this threshold shifts the focus back on the downside with such a scenario eyeing subsequent support objectives lower down at 1.6738/54 and the May low.

The average true range has remained rather tight here so we’ll up the profit targets to 38.2% of the daily ATR- this puts us at about 24pips per scalp. Note that caution is warranted heading into tomorrow’s rate decision with the event likely to fuel added volatility on sterling crosses. More significant data for the pound comes into focus next week with the Bank of England Quarterly Inflation Report on tap for Wednesday. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Technical Relevance

Bearish Invalidation

Daily / 30min

1.6890–1.6900

Monthly & Weekly ORH / 23.6% Retrace

Break Target 1

30min

1.6930

Soft Resistance / Pivot

Break Target 2

30min

1.6955

38.2% Retracement

Break Target 3

Daily / 30min

1.6984-1.7000

2009 Close High / 50% Retrace / May High

Break Target 4

Daily / 30min

1.7045/65

61.8% Retrace / 100% Ext(s) / 09’ High

Break Target 5

30min

1.7094

7/23 Swing High / Soft Resistance

Bullish Invalidation

Daily / 30min

1.6809/24

Weekly & Monthly ORL / 50% & 76.4% Retrace(s)

Break Target 1

Daily / 30min

1.6738/55

61.8% Retrace / 61.8% Ext(s) / 2011 High

Break Target 2

Daily / 30min

1.6692

May Low

Break Target 3

30min

1.6660

Soft Support / Pivot

Break Target 4

Daily

1.6634

200DMA

Average True Range

Daily (20)

63

Profit Targets 22-24pips

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play:

  • NZDUSD at Key Support and August Range Low- Exhaustion or Break?
  • EURUSD Risks Correction Into August Open- 1.3372 Key Ahead of ECB
  • USDOLLAR Vulnerable Heading Into NFPs- August Setups in Focus
  • EURAUD Risks Near-Term Reversal Heading Into H&S Target, Key Support
  • AUDNZD Rally At Risk Ahead of RBNZ- 1.0880 Key Resistance
  • NZDCAD Testing Range Support Ahead of RBNZ- 9295 Key
  • GBPJPY Eyes Major Inflection Zone- Weekly Opening Range in Focus
  • NZDJPY Reversal Underway- Scalps Target Key Support at 88.20

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