Bottom line: GBPUSD long term structure remains bullish against 1.1414 lows. In the short term, Sterling might have completed a corrective drop towards 1..2330/40 mark. Bulls might be poised to push higher towards 1.2900 and further, going forward.
Fundamental Outlook:
EURUSD exchange rate has dropped over 250 pips since recent highs above 1.1400 mark. The risk currency had come under pressure over fears of another wave of COVID-19 infections. It is quite possible that the EURO might have found support around 1.1167 today but a continued shift towards safe haven US Dollar might dampen EURUSD exchange rate further.
FTSE might come under renewed pressure after recovering some lost ground over the last week. The indice rallied almost 2% over the last week, before closing at 6256. The rising tensions over border dispute between India and China may fuel risk aversion further this week.
GBPUSD continued its slide over the last week and dropped over 300 pips from the highs at 1.2688 levels. The US Dollar gained against most currencies, as risk assets slid over the rise in COVID-19 infections in US and other Asian countries. Sterling Pound would also take cues from Brexit developments over the week.
Technical Analysis:
GBPUSD seems to have corrected lower from its recent highs around the 1.2800 levels. It has carved a potential low around 1.2330/40 levels today and a break above 1.2450 would confirm that bulls are back in control. The potential target could be towards 1.2900 and 1.3200 levels.
GBPUSD is facing strong resistance around 1.2900 and 1.3200 respectively. Bulls need to break past 1.3200 mark to confirm a long term bullish reversal against 1.1414 lows. On the weekly chart, GBPUSD might have carved a meaningful low at 1.1414 terminating the diagonal structure. But we still need to see a break above immediate resistance to confirm.
Traders might still be inclined to hold long positions with protective stops below 1.1414 and projected targets above 1.2900 and 1.3200 going forward. A break below 1.2300 would indicate GBPUSD has carved a major top above 1.2800 levels and a larger correction is underway.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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