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GBP/USD Testing the 200-DAY SMA

GBP/USD fell sharply yesterday after the release of UK Jobs data and Bank of England's quarterly inflation report. BoE governor, Mark Carney pointed out a heightened concern over the lack of wage growth. This concern is apparently reasonable because we did see the Q2 earnings index contract compared to the same period last year. While the inflation report said the Monetary Policy Committee is maintaining its current plan for a rate hike, it can be implied that the wage concerns will prevent it from raising it in 2014. This weighed on the GBP, and the GBP/USD fell sharply to 1.67. Today, it extended lower and has tagged the 200-day SMA aruond 1.6655. 

I have been expecting some consolidation, when price approaches this area, especially with the daily RSI in oversold area. But the sharp, engulfing daily candle for the 8/13 session warns against this assumption of support and oversold condition. There could still be downside risk toward the 1.6560-1.6580 area, which represents a support/pivot area going back to January. 

GBP/USD Daily Chart:
(click to enlarge)

Even if there is a consolidation, and a pullback from this 1.6655 area, the bullish outlook might need to be limited to 1.6755 previous support area, or at most the 1.68 handle, where price might run into a falling trendline coming down from the 2014-high at 1.7191. Also, when the 4H RSI gets back to the 50-60 area, look out for sellers. 

A break above 1.6850, which would clear this week's high, might be needed to introduce a bullish correction scenario outside of the very short-term. We haven't had one of those yet since GBP/USD retreated from 1.7191.

GBP/USD 4H Chart

(click to enlarge)