GBPUSD has charted a lower peak followed by a lower trough on the daily time frame (left). This is a defined down trend. Yesterday, GBPUSD appreciated following its flash PMI beats. However, there is no follow through today.
The US PMIs beat consensus later in the day and this is having a dominant effect over the UK consensus beat. Geopolitical tensions are also driving capital towards the safety of the dollar. Russia remains bellicose on the Ukrainian front, and US-Sino relations have deteriorated. Putin said Russia will withdraw from the last major US-Russia nuclear arms control treaty and continue military action in Ukraine amidst growing diplomatic tensions.
Today, GBPUSD charted an inside day (candle still to complete). I.e. it trades within yesterday's range. This is a sign of uncertainty. The bulls do not have the confidence to take its price higher than yesterday's high. This risks charting the next lower peak in the series, a bearish development.
The hourly chart shows signs of weakness. The trend-following EMAs and the momentum-based stochastic have crossed bearishly (black ellipses). GBPUSD's stochastic is making its way to its lower quintile (blue arrow). Maintaining a position there will exert an underlying momentum, applying pressure on the currency pair.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.