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GBPUSD Trend Line Pullback (June 5, 2015)

GBPUSD has been trading in a downtrend recently, creating a descending trend line on its 4-hour forex chart. 

The pair is testing the falling resistance area at the moment, as it lines up with the longer-term exponential moving average and the 1.5400 major psychological level.

If this area continues to hold as resistance, GBPUSD could fall back to the previous lows at the 1.5200 major psychological level and even create new lows closer to the 1.5000 mark. Stochastic is moving down from the overbought area, confirming that a selloff is bound to take place.

However, the short-term moving average is edging close to the longer-term EMA, suggesting the possibility of an upward crossover. If that happens, GBPUSD could have a shot at breaking past the trend line resistance and moving up to test the next highs around 1.5600.

The main event risk for this trade setup is the release of the US NFP report, which is expected to show an improvement from the previous month’s reading. If so, the dollar could regain ground against its forex rivals, as this might confirm the possibility of seeing a Fed rate hike by September.

A weaker than expected jobs figure, on the other hand, might lead to an upside break for GBPUSD since it would suggest that the Fed would sit on their hands until next year. Take note though that the UK has just printed a weaker than expected services PMI reading the other day, suggesting the possibility of weaker growth figures for the current quarter.

150605   _gbpusd

Only the consumer inflation expectations report is up for release from the UK today and it might show a decline from the previous 1.9% reading, especially since the actual headline CPI dipped to the negative territory recently.

By Kate Curtis from Trader's Way

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