The British pound faces a pivotal week against the US dollar after the pair fell to its weakest trading level of the year last week, following broad-based demand for the US dollar currency on the foreign exchange market.
Worryingly for the British pound, demand still looks fairly weak above the 1.3800 handles at the start of the new trading week after last week’s rout towards the 1.3670 level. A series of top-tier data points from the US economy should decide the fate of sterling this week.
On the United Kingdom economic front, UK GDP headlines, while markets have some concerns about a delay in new vaccinations coming from Europe after the EU threatened to put a holt of vaccine exports to the UK now that Brexit has happened.
The markets’ focus has also been forward-looking lately. The UK economy is expected to come out of lockdown over the next few months, while the United States economy appears to be on a similar path to the United Kingdom.
Consumption, central bank policy, government spending, and jobs are probably going to be the major factors in deciding whether the latest recovery in the US dollar index is a powerful new trend or just a temporary recovery within a multi-month downtrend.
On the technical side of things, sterling is one of the top major currencies that is holding firmly above its 200-day moving average, thus keeping its long-term bullish trend intact. Sellers need to move the price towards the 1.3350 area to change the overall trend for the GBPUSD pair.
According to the ActivTrader Market Sentiment tool some 49 percent of traders are bullish towards the GBUSD pair. Traders appear to be largely on the fence at the moment, which means that the losses in the GBPUSD pair could start to slow down this week, and range bound trading could persist in the short-term.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, the 1.3900 level seems to be the key resistance zone to watch this week, as a number of important technical indicators are consolidating around this area.
The 200-period moving average on the mention time frame, key down slopping trendline resistance, and the top of Ichimoku cloud are all converging around this area.
Thus traders are still likely to hold a bearish short-term view towards the GBPUSD pair while the price trades beneath the 1.3900 level.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame the GBPUSD pair has tested below the neckline of a large head and shoulders pattern, at 1.3780 last week, however, selling demand was still not quite there yet.
Bears now need to be holding the GBPUSD pair below the 1.3780 level on a multi-day basis to get the bear party started in the GBPUSD pair towards the 1.3500 level, and possible the GBPUSD pair’s 200-day moving average, around 1.3350.
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© 2019 High Leverage FX - All Rights Reserved.