Earlier in London, sterling extended its morning slide after the second revision of second quarter GDP came in unchanged, but lower than an expected 0.4% gain. GBP/USD plunged 94 pips to 1.5265 after the release.
In my last GBP/USD post, I highlighted how the recent slide that began from the 1.5814 high appears to have been confirmed by a bearish butterfly pattern. The X to A leg targeted point D with 127.2% Fibonacci expansion level, while the B to C slide used the 161.8 Fibonacci expansion level.
Downward momentum may remain strong as this currency pair is already weak from a strong US dollar. The daily chart shown above shows that key support may come from the both the 50.0% Fibonacci retracement of the April low to May high move and the 100-day SMA. If the 1.5189 level does not hold, deeper support may come from the psychological 1.50 handle.
Major resistance will come from yesterday’s high of 1.5436. A daily close above that level could open the door for a rally to target the 200-day SMA.
The trade: Sell GBP/USD 1.5285, with a stop loss at 1.5335 and take profit at 1.5185. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading