Bottom line: GBPUSD long term structure continues to remain bullish against 1.1414 lows in March 2020. The currency might have carved a meaningful top around 1.3267 mark over the short term though. Bears might remain in control in the near term.
Fundamental Outlook:
EURUSD had reversed from recent highs at 1.1965 on August 19, 2020 post FOMC minutes. The exchange rate had print 1.1754 low before pulling back. It might come under further pressure as the US Dollar strengthens over next few weeks. Watch out for the Jackson Hole Economic Policy Symposium later this week, which may add bearish pressure.
GBPUSD exchange rate had reversed from 1.3267 mark over the last week, closing below 1.3100 handle last week. The exchange rate might face volatile price action as yet another round of Brexit negotiations failed over the last week. It would also take cues from the Jackson Hole Symposium as US Dollar might be setting up to gain.
FTSE is up +1.2% as we prepare to publish and trades close to 6100 mark. The indice remains at a risk of yet another round of selloff as global indices continue to diverge. While SPX500 and NASDAQ climb to new highs, Dow Jones remains stagnant. Investors might remain watchful as COVID-19 infections and geopolitical risks remain.
Technical Analysis:
GBPUSD might have carved a meaningful lower top around 1.3267 mark over the past week. The currency had sharply reversed and print swing lows around 1.3090 levels. Also note that daily chart has produced an engulfing bearish while a bearish pin bar has appeared on the weekly chart, indicating a potential reversal ahead.
GBPUSD had earlier rallied from 1.1414 lows in March 2020, carving a series of higher high and higher lows through 1.3267 respectively. The entire rally could be retraced, before resuming higher again. Please note that fibonacci 0.618 retracement is seen towards 1.2100 mark and hence probability remains high for a bullish turn.
Most traders might be preparing to initiate fresh short positions around 1.3100/50 mark, with protective stops just above 1.3267 resistance. The projected target could be towards 1.2100 levels. Only a consistent break below 1.1750 changes the bullish structure.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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