GBP/USD - daily chart
GBP/USD – daily chart

For forex traders in London yesterday morning, eurozone PMI and UK retail sales were the main items of fundamental news. And it was Cable again which provided us with some important trading lessons.

The first was how we need to be aware of positioning ahead of any major news release. In the run up to the retail sales number, Cable had been basing around the 1.4920 support platform, having come off the 1.4975 high of the previous evening, thereby creating the start of what looked to be a down candle.

However, as always is it the daily chart which is so important, providing us with a more macro view of any currency pair, and here Cable has been very bullish since bouncing off major support in the 1.4898 region.

Just ahead of the news Cable started to move up, and with the release the usual volatility occurred, which triggered a candle with a 56 pip spread – taking out both longs and shorts! Following such a price move, it was not surprising to see the pair retreat within the spread of this candle where Cable traded, with a bias to the upside until the US open. At the US open with USD buying, Cable fell back to a low 1.4979. However, for the remainder of the US session Cable simply continued higher before pausing at the close at 1.5066.

This price action resulted in an up candle on the daily chart with a deep lower wick, signalling the GBP/USD was likely to continue higher, which it duly has in this morning session – moving to a high of 1.5145 and throughout the day to finally close the session and the week at 1.5182. Now the next key level awaits in the 1.5200 region and as denoted by the red dotted line on the accumulation and distribution indicator. This is a well developed area of price distribution, where strong selling has occurred in the past when approached from below, and even though today’s price action has been accompanied with strong volume, we could see the GBP/USD pause at this level in due course.

The current bullish sentiment for the British pound is also reflected on the currency strength indicator to the left of the chart, with the yellow line ( GBP) rising strongly. Finally to the bottom of the chart we can see that the trend monitor is now blue confirming the longer term bullish trend which is developing for the pair.