GBPUSD Risks Major Support Break Ahead of Key UK/US Data- 1.6820 Key

Talking Points

• GBPUSD risks correction with break below May opening range
• Critical support 1.6722/54
• Major event risk on tap from UK & US

GBPUSD Daily Chart

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

• GBPUSD testing Fibonacci support / monthly opening range low 1.6820/26
• May opening range high at 1.6995
• Break to validate monthly bias
• Downside break targets key channel support at 1.6722/54- bullish invalidation
• Topside breach targets objectives at 1.7040/65
• Daily RSI support trigger break last week- bearish
• 50-RSI support trigger pending
• Event Risk Ahead: UK Quarterly Inflation Report Wednesday morning, US Consumer Price Index (CPI) Thursday and housing data & University of Michigan Confidence report on Friday

GBPUSD Scalp Chart

Notes: Since our last GBPUSD update on March 26th, the pair has taken out all of our topside objectives, the last of which held as resistance 1.6890. Note that the high came in at the R1 monthly pivot at 1.6995 and a breach above this level targets a more critical resistance around 1.7040/64. That said, the pair now looks vulnerable as we test the may opening range low at 1.6820 and break/close below this level shifts the monthly bias to the downside for the pair.

Key support rests at 1.6722/54 – a region defined by a confluence of longer-term Fibs and operative channel support dating back to the November lows. A move below this zone would suggest that a more important high was put in place this month and while this is not our base case scenario, it highlights the significance of the upcoming support targets and its possible impact on our medium-term outlook.

Bottom line: look for a break of the weekly opening range heading into key event risk over the next 72-hours with a move below 1.6820 shifting our focus into the close of May trade. A rally surpassing the 1.69-handle would be needed to put topside scalps back into play targeting the monthly high and beyond. Note that near-term support and resistance triggers are pending heading into the close of US trade.

A few things to keep in mind: the ATR is tight and while this wouldn’t typically be our preferred setup the significance of the event risk ahead is likely to fuel a surge in volatility. The UK inflation report tomorrow and the US inflation figures on Thursday will be key here as prices hold this vulnerable position and could offer a catalyst for this setup. Note that the USDOLLAR index looks to be breaking out of a descending channel formation dating back to the yearly high and if 10,495 is overtaken, could see a renewed bout of USD support. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play:

• NZDJPY Monthly Opening Range Trade- Bearish Sub 89.50
• EURAUD Scalp Setup Favors Selling Rallies Sub-1.5030
• EURJPY Scalps Target Critical Support at 141

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email [email protected] or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars Wednesday and Thursday this week on DailyFX Plus (Exclusive of Live Clients) at 12:30 GMT (8:30ET)

Interested in learning about Fibonacci? Watch this Video