GBP USD continues retreat from 1 5500 resistance

GBP/USD continued to retreat from the key 1.5500 resistance level on Thursday as sterling gave back all of its gains from earlier in the day and the dollar surged on some renewed speculation over a potential Fed rate hike before the end of the year.

Early on Thursday, GBP/USD spiked to a high of 1.5506 after better-than-expected retail sales data coming out of the UK pushed the currency pair up to that key resistance level. The gains were short-lived, however, as the dollar dominated against most other currencies after US unemployment claims for last week came out lower (better) than expected, while the euro plunged after ECB President Mario Draghi issued dovish comments at the ECB press conference. GBP/USD subsequently fell to hit a low of 1.5368, its lowest level within the past week.

During this past week, the currency pair repeatedly attempted to push above the 1.5500 resistance level, but was unable to sustain its rallies, and retreated on each day.

The rise to 1.5500 resistance began in early October, when GBP/USD bottomed out just above key support at 1.5100. In the process of the rise since then, the currency pair has broken out above a key downtrend resistance line extending back to August’s 1.5800-area highs, as well as both the 50-day and 200-day moving averages. These two moving averages have since converged to the downside, potentially forming a bearish cross (or “death cross”) signal.

In the event that 1.5500 resistance continues to hold, a further retreat should find immediate support around the 1.5350 level, around where the two noted moving averages have also converged. Any further downside move should target key support around 1.5100.