Forex Trading: GBP/USD Marches Higher For The 5th Day In A Row

GBP/USD continued the move higher today (Tuesday) as the Construction PMI came out better than expected at 38.1 versus expectation of 31.9 (and up from 30.9 last month). The Construction PMI is calculated from the responses of a survey of 130 private sector construction companies.  A reading below 50 indicates contraction.  The index bottomed at 27.8 in February.

The data moved the GBP/USD to new highs on the day.  The pair, if it closes higher today, will have strung together 5 straight days higher after testing the 100 day moving average for 6 of 7 days (see chart above).  It is trading at the highest level since January 12th.  From a longer term perspective the price has room to go up toward the 200 day moving average which comes in at the 1.5881 level currently.  This would be the longer term target on continued cooperation from the hourly chart.

Looking at the hourly moving average, the price had a period of consolidation with the 100 (blue line) hour moving average and the 200 hour (green line), converging at the point of the break higher.  Once the consolidation area was broken to the upside the pair has been able to march higher, consolidating and getting close to the 100 hour moving average on a few occassions in the process.  The pair has been able to extend above the 1.5000 area and now 1.5100.  The gap between the price and the 100 hour moving average is now wide which may indicate an overbought situation with the possibility of a correction.

Drilling down to the 5 minute chart, the pair moved above the 100 bar moving average at the 1.5011 level today. After a test of the key moving average, the price started the move to the highs at 1.5128.

The price has been consolidating at the highs here for the last hour and a half  between 1.5097 on the downside and 1.5128 on the upside.  A break of either of the extremes will define the next directional move for the pair today.

If the price breaks the downside, the next targeted support down would be 1.5059 to 1.5061 level where some “remembered” highs and lows from earlier today occcurred (see chart below).    The 100 bar moving average (blue line) is moving toward that level as well. Watch both the “remembered level” and the 100 bar moving average as intraday support today.

A break of the upside should not be faded.  The market is trying to find a high and often times this leads to short covering spurts on each break higher.

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