One minute the quid is sailing merrily along breaking new highs, the next it's falling out the window.
Much like the euro, the pound has enjoyed a new year rally. It's come a hefty near 700 pips from the Jan lows, and that has happened in just over nine sessions . That's not bad work considering the Brexit storm clouds hanging over the UK.
A real measure of a rally is not in its moves up but on its ability to maintain momentum. To do that it has to overcome the pressures that want to destroy that rally. So, it's to the tech levels that we need to look as they can define where a rally may find support on any dips. The one here at 1.2500/15 is quite significant.
GBPUSD daily chart
This was an area I highlighted on the way up and now it's in play on the way down, and it's been joined by the 100 DMA. So far it's holding up in the face of a strengthening dollar. If it does break then there's another chance down at 1.2400/15, another prior resistance point and the 55 DMA. Although it's not on the chart above, we also have the 38.2 fib of this rally at 1.2410.
Technically speaking, there's enough here for GBP bulls to use to keep this move going. If they fail, then we're going to be on a pretty quick trip down to somewhere like the 1.22's.
A lot of this rally has come from what's been happening in the UK, which has been market positive, so that should be some comfort for buyers, that it's not all been USD led. Most of this drop is being USD led though. That should give longs the extra impetus they need to try and protect their positions and maintain the rally, after all, it's not negative UK fundamentals they're up against.
If the dollar continues it's climb then it will keep the pressure on but cable could be less susceptible to downside pressure than say, the euro. There's levels here for buyers and sellers to play. The 1.27 area is the next big resistance point but intraday, 1.2600 is the closer one.
US GDP is going to be a big number later and given the data we saw during the Q4 months, we should perhaps expect a better print than the 2.2% expected. If we get a decent number or beat then the 1.2400 area is one I'd watch carefully as fade point in GBPUSD, if it shows signs of holding.
