Last week, there was a very important event we shouldn't ignore : Retail Sales of UK (MoM) rose to 2.6%. The data caused a big surprise for all forecasters because they thought that it just increased 0.4%.
This reinforces greatly on the recover of UK economy, and affect positively on FX pairs having GBP : for GBP.
Last week, GBPUSD was governed by US data. Good Retail Sales and CPI of US driving GBPUSD lower and touched key 1.63 and then bounced back from this level due to good retail Sales of UK.
This week, there is no major US economy data, so G/U will be governed by UK economic data : BoE Meeting, ILO Unemployment Rate, Average Earning on Wednesday.
BoC said there are two reasons trigger raising Interest Rate are :
- Unemployment rate
- UK citizens earning.
If Retail Sales is so positive, it quickly transfer its positive affect to umemployment rate and Average Earning.
UK people go shopping strongly, it means they have jobs and increase earning.
We have necessary conditions to BoC raise interest rate, the problem is WHEN.
we don't expect BoC will change soon, but we expect they will more hawkish in their comments.
And this will drive GBPUSD higher.
We saw there is a convergence pattern we draw on the chart.
There is a strong obstacle at 1.63 zone: Kumo cloud, SMA50 and EMA50. Price cannot break this key support. It need a catalyst enough strong to break this level. In this time, I don't see any clue or catalyst which could drive G/U from this level. G/U could find dynamic from FED taper, but now not time for it.
Hence, if I choose for G/U, my next target is 1.6510
----- I will open LONG position .
LONG GBPUSD at current price.
Target: 1.6510 .-- 90 pips form current price 1.6420
Stop Loss: 1.63
Limit order: BUY at 1.6375
Take profit: 1.65
Stop Loss: 1.6290
Kumo is the long term resistance and support level.
- Price : above Kumo -- bullish trend.
- Price: below Kumo -- bearish trend.
- Price: inside Kumo -- undetermined trend -- price will fluctuate to escape Kumo -- it looks like a plane in the typhon : 1 fly higher to escape the typhoon or typhoon drag the plan fall down.