GBP_USD (88 Pips)The GBP/USD pair has been under pressure recently, hitting a 6-month low last week. However, it has shown some signs of recovery in the last two days, closing at 1.26400 after reaching a high of 1.26670.
Fundamental Analysis
Several factors are influencing the GBP/USD pair:
1. US Dollar Strength: The USD remains strong due to expectations of continued robust economic performance and hawkish Federal Reserve policies . However, there has been some respite for the GBP as the USD rally has stalled this week .
2. UK Economic Challenges: The UK economy faces headwinds, with recent data showing a slowdown in wage growth and a rise in unemployment to 4.3% . Additionally, UK GDP unexpectedly contracted in September, reinforcing expectations of potential rate cuts by the Bank of England (BoE) .
3. Inflation Concerns: UK inflation remains above the BoE's target, with October's CPI expected to rise to 2.2% year-on-year . This could limit the BoE's ability to cut rates aggressively.
4. Central Bank Policies: The December Fed meeting is around 60-40 in favor of a rate cut of 25 bps, while the BoE is expected to pause in December . This divergence could impact the pair's movements.
5. US Economic Data: Upcoming US data releases, including GDP and PCE data, could trigger a breakout from the current range .
Technical Analysis
The GBP/USD pair has been consolidating in a tight range, reflecting market indecision .
Key levels to watch:
- Support: 1.2500 (psychological level and recent low)
- Resistance: 1.2618 (recent range high), 1.2681, and 1.2750
Indicators:
- Moving Averages: The pair is trading below the 200-day MA at 1.2819 .
- RSI: In bearish territory but not yet oversold, suggesting room for further declines .
- MACD: Below the signal line, reinforcing the bearish outlook .
Outlook for the next couple of Days
Given the current fundamental and technical landscape, GBP/USD is likely to remain under pressure:
1. Range-Bound Trading: The pair may continue to trade within a range between 1.2500 and 1.2670, with any rallies likely facing resistance near these levels .
2. Potential Breakout: Upcoming US data releases could trigger a breakout from the current range . A decisive break above 1.2618 could lead to further upside towards 1.2681 and 1.2750 .
3. Bearish Bias: Despite recent gains, the overall trend remains bearish. A break below 1.2500 could open the path for further declines towards 1.2440 and 1.2390 .
4. Key Events to Watch:
- FOMC Meeting Minutes (November 27)
- US GDP and PCE data releases
- Any unexpected economic data or central bank communications
Traders should remain cautious of potential volatility driven by these events and monitor key support and resistance levels for signs of exhaustion or continuation in either direction.
Citations:
www.marketpulse.com
roboforex.com
www.instaforex.com
www.instaforex.eu
freshforex.com
Trade
Rationale:
The pair's recent recovery has brought it near the upper range boundary (1.2670–1.2681). With the broader trend still bearish and strong resistance in this zone, a short position offers a favorable risk/reward profile.
Entry: Sell at 1.2670.
Stop Loss: 1.2715 (45 pips risk).
Take Profit: 1.2580 (90 pips reward).
Risk/Reward Ratio: 1:2.0
Probability:
High, considering the confluence of resistance and bearish sentiment.
