GBP/USD Daily Forecast – Sterling Attempts to Hold Above 100-Day Moving Average

GBP/USD broke below important support last week that could be signaling the start of a new downtrend. In the early week, however, the pair is catching a bid from the 100-day moving average.
Jignesh Davda

The technical breakdown in GBP/USD last week was a significant one. The pair fell below a horizontal support level at 1.2960 that acted as support for most of the year and also resistance in the fourth quarter last year.

Of particular importance, was that the pair managed to breakdown despite a jump higher in UK service sector performance. Meanwhile, US jobs data, released on Friday, was mixed. The headline increase in the number of additional people employed was well ahead of expectations. However, the unemployment rate ticked up and average hourly earnings fell a bit short.

There isn’t any market-moving data scheduled for the session ahead, but UK GDP figures will be released on Tuesday. This will provide a first look at how the economy performed in the fourth quarter of 2019 and it is likely to move the exchange rate.

It should be a busy week. Both BoE Governor Carney and Fed Chair Powell will have the opportunity to share their latest views on the economy and monetary policy. Later in the week, the latest US retail sales and CPI data will be released.

Technical Analysis

The breakdown below 1.2960 in GBP/USD seems to suggest that the pair may have reversed from the bullish trend that began in September. So far the 100-day moving average is holding, and this could trigger a bounce.

GBPUSD 4-Hour Chart

How the pair ends the week relative to the mentioned price point will be important.

The pair has been bearish since the gap lower open last week. At this stage, it would take a break above 1.2960 to negate the downside pressure.

GBP/USD briefly broke to a two and a half month low in early trading today but has seen a steady bid since the European open. For the session ahead, the 1.2900 handle is seen as support.

Bottom Line

  • Last week’s price action has attached a strongly bearish view to GBP/USD from a technical perspective.
  • The week ahead is likely to be a volatile one with several market-moving data scheduled for release and testimonies from Powell and Carney.
  • UK GDP will be released in early trading tomorrow.
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