FX.co ★ GBPUSD: Bearish Outlook (December 20, 2013)

Overview:
GBP/USD is trading in a range. Sterling sentiment is dented by smaller-than-expected +0.3% on-month and +2.0% on-year increase in U.K. November retail sales (versus forecast +0.4%, +2.5% respectively). GBP/USD is also undermined by bullish dollar sentiment. But GBP/USD downside is limited after data Wednesday showed a surprise fall in U.K. unemployment rate to 7.4% in the three months to October from 7.6% in the three months to September, bolstering expectations that the Bank of England would be forced to raise rates sooner than it has forecasted.

Data focus:
0005 GMT U.K. December consumer confidence survey;
0930 GMT U.K. November public sector finances, 3Q GDP (3rd estimate), 3Q balance of payments.

Technical comment:
Daily chart is mixed as MACD is bearish; but stochastics is in bullish mode, inside-day-range pattern was completed Thursday.

Trading recommendation:

The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below its pivot point. A short position is recommended with the first target at 1.6335 in view. A breach of this target will move the pair further downwards to 1.6295. The pivot point stands at 1.6365. In case the price moves in the opposite direction, bounces back from support, and moves above its pivot point, the price is most favorably expected to move further to the upside. In that scenario a long position is recommended with the first target at 1.644 and the second target at 1.648.

Resistance levels:
1.644
1.648
1.652

Support levels:
1.6335
1.6295
1.6255