Bottom line: GBPUSD long term structure remains bullish against 1.1414 lows. Bears might remain poised to correct lower towards 1.1900/1.2000 levels over the short term, before the rally resumed. A continued drop below 1.1700 would threaten to test 1.1414 lows.
Fundamental Outlook:
EURUSD is up since Asia Open today, as the exchange rate is trading close to 1.1280/85. The exchange rate has gained as risk sentiment has opened this week on a bullish note. It could come under pressure as the week progresses and drop towards 1.0636.
COVID-19 pandemic has been rising across Asian countries along with the US. Trade wars between US-China, border situation between India-China and a looming economic recession are strong fundamental factors that can easily reverse risk sentiment. Risk associated EURUSD, AUDUSD might come under pressure, going forward.
GBPUSD has managed to bounce back from 1.2250 lows. The exchange rate is trading around 1.2500 for now and is expected to come under renewed pressure over Brexit woes. With the extension over transition behind us, UK and EU need to finalize terms by the end of 2020.
FTSE is up +1.0% along most Asian Markets, and trading close to 6250 levels. The indice is expected to stay below the June 08 high at 6510, going forward. The above fundamental factors, might soon trigger another selloff in Global Equity Markets.
Technical Analysis:
GBPUSD has remained in control of bears since printing high above 1.2800 mark. The currency had dropped through 1.2250 levels before pulling back and might be preparing to resume lower towards 1.1900/1.2000 over the next few weeks.
GBPUSD had earlier rallied from 1.1414, carving a series of higher highs and higher lows until hitting 1.2800 highs recently. Traders might be expecting a corrective drop, before the rally could resume towards 1.3500 and 1.4300 levels respectively.
Also note that 1.1900/1.2000 is close to the fibonacci 0.618 retracement of the entire rally between 1.1414 and 1.2800 respectively. Hence high probability remains for a bullish reversal, if prices manage to reach there.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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