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The GBP/USD exchange rate holds above 1.30 at the start of the new week and month, following a 2.30% advance on in the week prior. Analyst and technical forecaster Richard Perry of Hantec Markets says a downside corrective move could now be developing on GBP/USD.
With momentum stretched after an accelerating bull run, the bulls will need to react to Friday’s stalling candlestick to prevent what could be a corrective move developing on GBP/USD.
A candlestick that hinted at exhaustion on Friday, was arguably a shooting star, came after a succession of strong bull sessions.
The RSI is historically stretched around 80 and with traders coming back in on Monday morning to see a consolidation, there is a battle for control.
Can the bulls prevent the urge to take profits now on an impressive run higher? The hourly chart is hinting that the set up is less positive than it has been for over a week, but is still relatively positive.
The support of a two week uptrend comes in around 1.3000 this morning, and hourly chart moves show that there is a basis of support 1.2950/1.3000 which would be the first real band of support to be tested.
Coming into the European session, there is a lack of conviction in moves and a lack of direction.
The resistance at 1.3200 was considerable earlier in the year, and could again be the excuse for GBP/USD bulls to take a step back once more. As yet though, no conviction.
Dollar Comeback Underway
There is plenty for markets to contemplate as trading begins for August.
The dollar has been under huge pressure in recent weeks as traders have factored for an underperforming US economy due to the alarming second wave COVID infections.
However, as other countries increasingly find their own problems with second waves (the Australian state of Victoria going back into lockdown), perhaps the US dollar may begin to find some respite? Could a rebound on the dollar become an August story?
Hints of a dollar rally this morning, but as yet nothing confirmed. It may depend upon leaders in Congress coming to an agreement on how to react as emergency US employment support expires.
As yet, there is no consensus of how to push forward, but another fiscal package to support the labor market would help to allay fears of faltering consumer confidence.
Risk appetite has certainly been wavering in recent sessions, but the better than expected China Caixin Manufacturing PMI has helped to prop up sentiment this morning. The manufacturing PMIs for July could be a driving factor through today’s session, with eyes on the ISM data later today.
Wall Street closed a tumultuous session on Friday with S&P 500 gains of +0.8% at 3271, whilst futures are a touch weaker today with the E-mini S&Ps -0.1%.
Asian markets took the lead from the Chinese PMIs with the Nikkei +2.2% and Shanghai Composite +1.4%.
In Europe there is a mixed look to early moves, with FTSE futures -0.2% and DAX futures +0.2%. In forex, USD is climbing through the majors, with CHF and AUD primarily weaker.
In commodities, hints of a dollar rebound are weighing slightly on gold and silver, whilst oil is just under -1% lower.