After a sharp fall on Tuesday, GBP/USD has fallen into a range. US GDP figures will be released later tonight, which can trigger some volatility.
There was some strong downside momentum in GBP/USD on Tuesday after it failed to cross an important resistance level. That momentum has died down significantly as the pair has fallen into a range. On a 4-hour chart, the 100 and 200-period moving averages appear to be containing price action.
There are several factors that stand to impact the exchange rate over the short-term. To start, the final release of quarterly GDP out of the US is scheduled for release later today. As a final release, however, the data tends to not to have a significant impact, unless there is a big deviation from expectations.
What stands to have more of an impact on the US economy, and on US monetary policy, is the ongoing trade war between US and China. President Trump and China’s President Xi will be meeting later this week at the G20 summit taking place in Japan. I am speculating that there will be a drop in dollar volatility until the outcome of the meeting is announced.
Aside from the GPD data release today, there are a few other releases that pertain to GBP/USD. One that I will be watching is the US weekly unemployment claims. This figure rarely has a sustained move on the markets, however, it is a good indicator of how the jobs market is doing. This is particularly important when it comes to speculation of US monetary policy easing which has been a major driver for the greenback.
As mentioned, GBP/USD is trading between two moving averages on an hourly chart. I don’t see much oppurtunity here. I think it is easy for the pair to either fake out higher or lower at this stage.
If the pair moves higher, I expect that sellers will cap rallies at 1.2747 or perhaps even ahead of it, considering how important of a level it is. To the downside, I see some strong support at 1.2655.
The hourly chart shows the pressence of the 200-period moving average near the horizontal level, creating a bit of a confluence. I think that the markets will await the outcome of the G20 meeting before we start to see sustained moves in GBP/USD.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.