The British Pound climbed higher against the US Dollar during the past couple of sessions, as the latter one
tumbled. The main reason for a decline in the US Dollar was a speech from the Fed chairwoman, Janet Yellen.
In a speech on Tuesday, she stated that the fed will be very cautious due to a weak global economy and stubbornly
low inflation. She mentioned that a careful approach is needed for interest rate hikes.
Additionally, “If economic conditions were to strengthen considerably more than currently expected, the Fed could readily raise rates to
stabilize the economy,” she added.
Overall, the US dollar bulls were not happy after her comments, and as a result, there was a downside move
against most major currencies, including the British Pound.
The British Pound traded higher towards the 1.4450 resistance area against the US Dollar, which according to me is
a major barrier for the bulls.
If we look at the 4-hours chart of the GBP/USD pair, then the stated level represents a range resistance area. So,
there is a chance of a false break in the pair before it moves down once again. However, the stated scenario is valid
only for a short term, as once the sell idea is completed, we may be looking to enter a BUY later on.
H4 – The 4-hours chart of the GBP/USD pair highlighting an important range resistance area near 1.4450.
H1 – In the short term, I think we can look for a sell trade. There is a chance of the GBP/USD pair spiking higher
above the range resistance area to complete a false break.
Once the pair completes a false break and forms a bearish divergence on the lower time frame chart, then we can
enter a sell trade (as highlighted in the chart).
Note – This is a short-term view, since we may look to enter a buy trade once the highlighted cycle gets completed.
Target 1: 1.4350
Target 2: 1.4300
Stop Loss: 10 pips above the last high created before entering the trade.
Fundamental events recap and Economic news to watch out
Fundamentally, the U.S. ADP Employment Change, which is a measure of the change in the number of employed
people was published by the Automatic Data Processing, Inc.
The market and experts were expecting a change of 194K jobs in March 2016, compared with the previous
standing of 214K. However, the outcome was mixed, as the U.S. ADP Employment Change came in at 200K in
March 2016 with a downward revision for the last reading from 214K to 205K.
Commenting the report, the head of the ADP VP and Research Institute, Ahu Yildirmaz, stated "The Trade,
Transportation and Utilities sector had its best month of employment gains since last June. Steady employment
growth and accelerating wage growth in the workforce appear to be benefitting the Trade segment in particular”.
The report had a minor impact on the GBP/USD pair, so let us wait for the right time for our sell scenario.
Good Luck with trading today traders!