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GBPUSD rachets down in overnight trading

The GBPUSD stepped down overnight.  The Retail Sales rose by 0.4% for the month versus +0.5% expectations. However, the revision from prior month rose to 3.4% from 2.9%.  The money supply also rose by a greater than expected +1.8%, and the Public Sector Net Borrowing which measures the difference between money coming in and money going out showed the largest deficit since 1993 as tax revenues are down and welfare costs surged.   This may have led to the pressure on the GBP we are seeing this morning.

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From a technical basis, the price dipped back below the 100 hour and 200 hour moving average today which helped accelerate the decline. There was a corrective period in the early London session which saw the price correct above the 200 hour MA, but the move could not gain any upside momentum and the downside was resumed.

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Looking at the daily chart the fall below the 100 hour MA at the 1.6742 level (blue line in the hourly chart above),  corresponded with a fall below the June 30th high and the September 11th high of 1.6743 and 1.6741 level respectively.  This combination got the ball rolling to the downside, and if a trader was astute to these levels, a nice trend trade could have been established.  The price has stalled against the low 1.6600 (low reached 1.6615).  Looking back over the last 4-5 months, the price probed above the 1.6600 level on a number of occasions.  There have been three with extended the range more than the others (which were mostly one day spurts (see daily chart). This last move higher has had 11 days where the price has traded above the 1.6600 level.  The longest previous time above since June has been 7 days.  As a result, we are seeing profit taking buyers against the level this morning and will likely continue to see support buying.  If the level can break, however, we should see further downside pressure.

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On the 5 minute chart the price has continued to track down using the 100 and 200 bar MA as the resistance levels.  

With a good support at the low 1.6600 area, the price has some upside resistance at the 1.6659 level. The last time the price was at this level, the market had support/resistance at the level before moving higher (see chart below).  The 100 bar MA on the 5 minute chart (blue line in the 5 minute chart above)  is also likely to provide upside resistance for the pair. That level comes in at the 1.6677 level.   Look for sellers against these  levels this morning.

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