Bottom line: GBPUSD long term structure remains bullish against 1.1414 lows. The currency might be close to carving an intermediary top around 1.3200 levels in the near term. It might be setting up for a corrective drop towards 1.2100/1.2200 levels before turning higher.
Fundamental Outlook:
EURUSD exchange rate is consolidating in a range just below the 1.1900 handle. It would be looking to take further cues from the FOMC and ECB Monetary Policy due Wednesday and Thursday respectively. The unsuccessful negotiations on new fiscal stimulus and US-China tensions could add pressure on the EURUSD in the coming weeks.
FTSE has dropped over -3.0% in the past two trading sessions and managed to close the week around 6086. With US-China talks over the weekend postponed indefinitely, any further rift might trigger risk aversion. Global equity markets remain vulnerable for another round of selloff, as investor sentiment might change very quickly.
GBPUSD has been trading below 1.3100 mark after having peaked around 1.3186 on August 06, 2020. The exchange rate might come under further pressure with the safe haven US Dollar set to gain. Risk assets and currencies (Gold, Global equity markets, NZDUSD, AUDUSD, EURUSD) remain vulnerable.
Technical Analysis:
GBPUSD might be close to carving a meaningful top around 1.3200 levels and a break below 1.3000 would confirm. Bears might be preparing to be back in control as the currency produces a corrective drop towards 1.2100/1.2200 handle, going forward.
GBPUSD had dropped to fresh lows around 1.1414 levels in March 2020. Since then, it has remained in control of bulls carving a series of higher highs and higher lows through 1.3186 levels. Immediate resistance is seen around 1.3200 handle and a break there would be constructive for bulls.
Having said that, GBPUSD also remains vulnerable for a corrective drop thereafter. The fibonacci 0.618 retracement of rally between 1.1414 and 1.3186 is seen towards 1.2085 levels. High probability remains for a bullish turn, if prices manage to reach there.
Most traders might be preparing to take profits on long positions between 1.3100/1.3200 levels. They might remain flat and allow the corrective drop to reach 1.2100 handle before initiating long positions again. Watch out for a turn lower from near 1.3200 handle soon.
Prepared by
Harsh Japee, Technical Analyst.
GBPUSD Chart
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