Bottom line: GBPUSD long term structure remains bullish until prices stay above 1.1414 levels. Bulls continue to print higher highs and higher lows and managed to hit above 1.2420 mark today. In the short term, the currency might correct lower towards 1.2190 levels at least, before resuming higher again.
Fundamental Outlook:
GBPUSD has covered a lot ground from its May lows at 1.2080 mark. The British Pound gained against the US Dollar along with other majors and is now trading comfortably above the 1.2420 mark. We can expect some volatility to chip in as Brexit talks resume. It remains to be seen if the June deadline for transition is extended or not.
FTSE managed to gain over +1.5% last week, closing around the 6100 mark. The indice would be taking cues from its peers Dow Jones and SPX500; along with the proceedings over Brexit. Risk sentiments refused to budge over the rising tensions between US and China over the past couple weeks. It would be interesting to see how long the rally continues as the week proceeds.
EURUSD continues its march higher and gained over the last month, managing to test 1.1150 mark last week. This despite rising tensions between US and China, the US Dollar Index declined over the past few trading sessions as risk sentiment continued its gains. It remains to be seen how EURUSD would react to host of events including the ECB rate decision and US Non-Farm Payrolls this week.
Technical Analysis:
GBPUSD continues to print higher highs and higher lows as bulls hit 1.2420 levels today. Over the medium to long term, the currency is expected to push towards 1.2900, 1.3200 and higher. Bottom line, prices must stay above 1.1414.
GBPUSD might produce a corrective drop lower towards 1.2190 before resuming its rally. Also note that the drop might extend below 1.2080 levels as well. In that case the fibonacci 0.618 retracement of the entire rally between 1.1414 and 1.2650 might be tested.
Traders might take profits around current price action (1.2400/20) and remain flat allowing GBPUSD to correct lower, before finding support again.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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