Bottom line: GBPUSD long term bullish structure remains intact as prices stay above 1.1414 lows. The currency is retracing lower since last Friday and might find intermediary support around 1.2080/1.2100 mark.
Fundamental Outlook:
GBPUSD faced selling pressure on Friday and may continue as BREXIT fears return. As another round of negotiations between UK and the EU concluded on Friday, little or progress seem to have been made. The currency also faces uncertainty over rising tensions between the US and China amidst the ongoing COVID-19 crisis. The GBPUSD trades just above the 1.2100 mark as we write this article.
FTSE had closed lower by over -1.0% last week, as most Global Equities. The indice had dropped to 5635 lows on Thursday, before closing the week at 5907. Over the coming weeks, FTSE is expected to reel under further pressure as BREXIT fears return. As economies continue to re-open across the US and Europe, concerns remain over COVID-19 cases rising.
EURUSD might reel under further pressure as it continues to consolidate since printing highs at 1.1500 levels around mid-April. The minutes of ECB Monetary Policy meeting later this week shall be closely monitored to see if more stimulus would be required. Furthermore, a re-emergence of US-China trade war tensions could be a negative for EURUSD, as safe haven US Dollar would be back in demand.
Technical Analysis:
GBPUSD might have completed its first leg rally between 1.1414 and 1.2650 respectively. It is found to be correcting for now and might be close to forming an intermediary bottom around 1.2080/1.2100 levels. High probability remains for a rally towards 1.2430/50 levels before deciding further direction.
Structurally, we continue to favour a major bottom formation around 1.1414 levels earlier. The rally between 1.1414 and 1.2650 looks to be an impulse already, indicating further rally towards 1.3500, going forward. Also note that GBPUSD has dropped to fibonacci 0.382 retracement of previous rally and a bullish bounce remains high probability.
Most traders might be preparing to add fresh long positions around 1.2100 handle with risk at 1.1414 and potential targets above 1.3500 respectively.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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