GBP-USD Pushes Above 1.5500 Ahead of UK GDP Figures

The Federal Reserve chairwoman Janet Yellen indicated yesterday that the US central bank would not rush into raising rates, which has seen the GBP-USD trade higher today. A 28% chance of a rate hike in June has been priced into the market. The pair currently stands at 1.5498, up 0.31% on Today’s open and near an 8-week high. The price action has pushed above the second weekly Fibonacci resistance level at 1.5500 today, posting a high at 1.5537, and the next weekly resistance is found at 1.5564. Support will be encountered at 1.5460. A move below this level will open up the psychological support at 1.5400.

This morning saw positive data from the UK in the form or mortgage approvals, which were higher than expected at 36,400 versus 35,800 in December. Later today and tomorrow US data will drive the pair. Also, the markets will be watching Yellen’s second testimony at 15:00 GMT today. Yesterday’s testimony was vague and ambiguous, so the message might be clearer today. She did take an upbeat tone with regards to labour market conditions and pointed to a range of labour market measures improving, indicating market slack is reducing. Also, her stance on the external economic situation was slightly more positive than her last remarks. However, the market pushed the Dollar lower subsequently as scepticism strengthened regarding the Fed’s confidence that the fall in inflation precipitated by oil prices will only be temporary.

Tomorrow, GDP figures are expected for the UK at 09:30 GMT, where the annual growth rate for Q4 is expected to be 2.7%, unchanged from Q3. A higher than anticipated figure will be bullish for GBP-USD and could see the 1.5600 level tested. House price growth is also due and a high, positive reading will be bullish for the Pound. Total business investment is expected to pick-up from last month’s reading and is expected to come in at 1.9% Quarter on Quarter growth.

Thursday afternoon’s main focus will be the Consumer Price Index annual growth for the US (13:30 GMT), expected to dip into negative territory at -0.1% from 0.8% last time. If the reading is more negative this will be bearish for the US Dollar and the Fed may become more dovish as concerns about deflation could increase. Also, a worse than expected reading may embolden sceptics who think that the Fed is not that confident the fall in inflation will only be transitory.

Tomorrow is a good opportunity to make gains on a long position on GBP-USD. The 4 hour chart is shown below. The Fibonacci retracement levels are also shown below and they suggest the follow levels as good entries on the current upward trend; 1.5460, 1.5435 and 1.5410. Suggested stop loss at 1.5362, the open of the strong bullish candle on Monday afternoon. Suggested profit target the third weekly Fibonacci resistance level at 1.5564 and the resistance levels indicated by Ichimoku analysis, i.e. at 1.5585 and 1.5640.