The GBP/USD tested the resistance of the 55-hour SMA and the pivot point at 1.3000 level. These levels eventually caused a sharp decline, which reached the 1.2800 level.
On Friday morning, the pair tested the resistance of the monthly S2 and weekly S3 simple pivot points near 1.2835.
Economic Calendar
The week will end with the publication of the US Consumer Price Index and Core Consumer Price Index changes. This event had been insignificant and did not cause increases of volatility since April. However, in August, there were notable moves on all USD pairs.
During the next week, noteworthy events start on Wednesday, 06:00 GMT, at that time, the United Kingdom Consumer Price Index year on year change is set to be published. During the last six months this event has caused moves from 10.0 to 16.2 base points.
On the same day, at 12:30 GMT the US Retail Sales and Core Retail Sales data sets are set to be published. The event could cause 11.5 to 35.9 pip moves.
Wednesday's events are set to end with the most notable event of them all - the Federal Open Markets Committee announcements and the US Federal Reserve Rate Announcement. The GBP/USD has moved from 18.9 to 68.5 pips on the announcements.
On Thursday, the Bank of England is scheduled to make a rate announcement at 11:00 GMT. All GBP traders are bound to watch this event. Since March, the event has caused moves from 40.0 to 62.1 pips.
Afterwards, at 12:30 GMT, the US weekly Unemployment Claims could cause a move. Note that the two last releases caused, respectively, 20 and 49 pip moves.
On Friday, minor 10.0-16.2 moves might be created by the 06:00 GMT UK Retail Sales.
Click on the link below to see the historical reaction tables.
GBP/USD short-term review
On Friday morning, the rate was testing the resistance of the two mentioned pivot points near 1.2835 and the psychological level of 1.2850.If the rate manages to pass these levels, it could retrace back first to the 1.2900 level and afterwards the 55-hour SMA near 1.2925.
In the case of the resistances holding, the rate could look for support in round exchange rate levels. Namely, the 1.2800, 1.2750 and the 1.2700 levels. In addition, the 1.2700 level is strengthened by a monthly pivot point and a 61.80% Fibonacci retracement level.
Hourly Chart
On the daily candle chart, the pair has passed the support of the 55-day simple moving averages, which kept the exchange rate up on Wednesday.
Next support for the pair on this chart is the 200-day SMA at 1.2738 and the 100-day SMA at 1.2688.
Daily chart
Read More: Technical Analysis
Short sentiment is gone
On Wednesday, 61% of trader open position volume on the Swiss Foreign Exchange was in short positions.
On Thursday, 58% of volume was short. On Friday morning, only 54% of volume was short.
Meanwhile, in the 100-pip range around the rate the pending orders were 88% to sell the GBP/USD pair.
Previously, the orders were 58% to sell.
On Wednesday, 61% of trader open position volume on the Swiss Foreign Exchange was in short positions.
On Thursday, 58% of volume was short. On Friday morning, only 54% of volume was short.
Meanwhile, in the 100-pip range around the rate the pending orders were 88% to sell the GBP/USD pair.
Previously, the orders were 58% to sell.