GBP/USD - Bullish outside day candle, eyes UK economic plan
- Friday's bullish outside day candle, but follow-through weak in Asia.
- UK's post-Brexit economy plan will be unveiled today.
Friday's bullish outside day candle on GBP/USD, though encouraging, may not be enough as techies believe only an end of the day close above 1.3338 (Oct. 3 high) would validate the bullish candlestick pattern.
The follow-through to Friday's bullish outside day candle was weak in Asia. The currency pair slipped in Asia to 1.3315 levels vs. Friday's close of 1.3338.
Risk reversals remain flatlined
The bullish technical breakout on GBP/USD has gone unnoticed in the options market. The one-month 25 delta risk reversals remain flatlined at -0.725, suggesting the move above 1.33 has failed to revive the demand for GBP calls. A sustained move above 1.3338 might revive the risk reversals/demand for GBP calls.
An uptick in the risk reversals indicates increased demand for (GBP) calls, while a decline indicates Puts are in demand.
Focus on post-Brexit plan
A BBC report released earlier today said the government's plan to boost UK industry ahead of Brexit is due to be unveiled later today. As per Reuters report, the plan aims to intervene in key sectors to tackle weak productivity and bolster businesses to counter any new problems caused by Brexit. Also, FX desks would keep an eye on the treasury yield curve and the US-UK 10-year yield differential.
GBP/USD Technical Levels
FXStreet Chief Analyst Valeria Bednarik writes, "technically, the pair seems poised to extend its advance according to the daily chart, as technical indicators continue advancing, now at their highest in two months and retaining the bullish momentum, while the price settled far above its moving averages. Shorter term, and according to the 4 hours chart, the strength upward eased, but the scale is still lean towards the upside, as indicators remain within positive territory, with the RSI trying to resume its advance around 63. Also, the pair holds at the upper half of a daily ascendant channel, with the base around 1.3280, also Friday's low, for this Monday."
Support levels: 1.3310 1.3280 1.3240
Resistance levels: 1.3370 1.3410 1.3445