GBPUSD technical analysis
Cable longs have been one of the best trades of February but as the month winds down, negative signs are building. Today, the pair is caught up in a wave of US dollar strength after strong wage growth in the CPI report but the stall came at a critical point.
The rally topped out just ahead of the Dec 31 close and right around the highs of the year at 1.5600. The 100-day moving average was also acting as resistance.
The warning sign is a big, bearish engulfing candle at the top of the trend. So far, the modest uptrend from the February lows is holding but it's only been tested once before so it's unlikely to be strong enough to build a trade on.
To me, this is a signal that cable is entering a retracement phase and could fall to the 55-day moving average at 1.5331, which also corresponds roughly with the Jan 14 high.
The good news for the pound is on the crosses. We have been touting EUR/GBP shorts and they continue to perform. That's especially heartening on a day when the pound is getting kicked around.
Note that Bank of England deputy Shafik speaks at 1730 GMT. She's a soft hawk and the theme in cable trading has been a bit more hawkishness at the BOE. If she talks about hiking rates and boost the pair back above 1.5469 at the close, that would invalidate the bearish candle.
