GBP/USD Daily Fundamental Forecast – October 18, 2016

We had mentioned in our forecast yesterday to expect a tight ranging day or trading and thats what we got yesterday. The pound started off the week on a very weak note due to comments over the weekend from the Euro leaders who wanted a tradeoff of free movement for free access to the Euro market for the UK businesses and this basically continued the war of words between the UK and the Euro leaders which has been going on for the past couple of weeks as no one seems to be sure on how the Brexit process is going to exactly pan out and this will continue to keep a lid on any kind of upmove in this pair anytime soon.

GBPUSD soon recovered from the weak beginning and continued its move towards the resistance at 1.2180 and it spent the rest of the day in a very tight consolidation range between 1.2130 and 1.2180 and like the rest of the market, it was basically moves with no specific direction and with no specific intent and this became clear midway through the US session. This morning, the pair made a quick run from 1.2180 to the resistance at 1.2250 on low liquidity and general USD weakness.

Looking ahead to today, we have the CPI data to be released from the UK today and we have seen recently that all the data from the UK have exceeded expectations. But with all the negativity surrounding the Brexit process and with the pound at historic lows, we do not expect much of an upmove even if the data were to beat expectations of the market. On the other hand, if the data was to turn out bad, it would weaken the GBPUSD pair even more and push it further towards 1.2100 and maybe even 1.2000. We also have the CPI data to be released from the US close to the US session and this is also bound to bring in some volatility. So, do not get fooled by the slow markets to start off the week. Maybe it is just about time to tighten our seat belts for the big ride. On top of the range, we continue to have 1.2250-70 capping the upmove with 1.2130 and 1.2000 covering the bottom and 1.2360 beyond.

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