GBP/USD Daily Fundamental Forecast – October 19, 2016

GBPUSD has been having a bullish time in line with the general USD weakness across the board. We had mentioned in our forecast yesterday to our users that there is likely to be some USD weakness over the next few days, more as a correction to the USD strength that has been seen of late and this has been proved right so far. The GBPUSD pair made a smart recovery from its lows towards 1.2100 and has been rising ever since yesterday morning and continues to rise as of today as it now tests the resistance in the 1.2300s as of this writing. It has indeed been a much needed break for the buyers who have been under relentless pressure of late but now the pair enters into a region which has proved to be tough to break and which we believe will continue to be difficult to crack for the bulls.

The recovery began yesterday morning on low liquidity as the pair broke through 1.2100 and 1.2200 early morning and then consolidated through the euro session. The US CPI data was largely on the lines of what was expected from the data and hence the USD weakness continued and this gave further fillip to the buyers who took the pair beyond 1.2300 upto 1.2320 where it has been facing some stiff resistance over the last few hours.  It was also helped along by a slightly better than expected CPI data from the UK which was on lines of the UK data of late which has all been better than expected so far.

Looking ahead, we have the average earnings and claimant count data to be released from the UK but the challenge would not be in the data but the fact that there is likely to be some large selling in the region between 1.2320 and 1.2360 which has proved to be a wall ever since the large drop in the pound overnight. The pound has not been able to scale up this wall for the past 2 weeks and we believe that this will be the case today as well. So, buyers can exit their buys in this region and wait for a break over this region or a correction while sellers might find this region to be a good place to sell.