GBP/USD Daily Forecast – Pound Drops to Fresh 5-Month Lows

After falling for four consecutive sessions, GBP/USD is trading at levels not seen since early January. The pair has been mostly consolidating sideways in early European trading while the dollar is catching a bid.
Jignesh Davda
GBP/USD

Double Top Pattern in GBP/USD Has Completed

In prior forecasts, I’ve discussed the double top pattern in GBP/USD. The neckline of the pattern falls at 1.2655 and was broken on Friday shortly after the US retail sales report triggered a broadly stronger dollar.

The measured move target for the pair falls at 1.2545 and the pair is currently trading just below it. Sometimes we see a bounce after a target has been reached, but that has not been the case this time around as the pair sliced right through the target.

I believe the next direction for GBP/USD will be entirely based on the economic calendar as there are several major risk events on the docket in the second half of the week.

For most market participants, the focus will be on the Fed meeting that is scheduled to take place tomorrow. It is expected to be a much more volatile week for GBP/USD traders as there are several more risk events.

Governor Carney is scheduled to speak later today. Considering the sell off in EUR/USD today following Draghi’s speech, this is probably not a speech to dismiss.

On Wednesday, UK CPI data stands to move GBP/USD and on Thursday the BOE will present its latest policy stance.

Technical Analysis

It is quite likely a number of traders got stopped out on today’s decline. It took the May low which is considered to be a significant price point. I suspect any traders that were long, which can be quite a few considering how weak the dollar recently was, might have had their stop below it.

GBPUSD 4-Hour Chart

For that reason, I see 1.2558 as the first upside hurdle as it reflects the May low. A breach above it exposes 1.2580 resistance.

In terms of support, I consider 1.2480 to be significant and the next possible downside target. This level reflects the lowest the exchange rate traded last year, on a daily close basis.

GBPUSD Hourly Chart

Bottom Line

  • GBP/USD is showing some exhaustion and has met targets from the double top pattern. However, the long side continues to look risky
  • There are several risk events pertaining to the pair in the second half of the week. I expect a jump in volatility

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US