Over the weekend I commented on a 260 pip range that would likely restrain the GBPUSD this week. Key support came in at 1.2415 while resistance was last Thursday’s high at 1.2673.
I wasn’t too far off the mark as this week’s low so far is 1.2411, and yesterday’s high was 1.2705.
But more important is the way yesterday’s session shaped up. After rallying 30 pips above the 1.2673 level on an intraday basis, the pound gave back 180 pips against the USD, forming a bearish engulfing day in the process.
However, current prices are too close to key support at 1.2415 to secure a favorable risk to reward ratio. As such, I’ll be on the lookout for a retrace – perhaps into the 1.2600 area – before considering an entry.
Otherwise, we’ll need to wait for a close below 1.2415, which would expose the next level of support at 1.2200. Only a daily close above the 1.2670 area would negate the bearish bias.
The upcoming non-farm payroll report at 8:30 am EST could create an opportunity here, but I won’t be doing anything until the dust settles.
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