GBP/USD Daily Forecast – Sterling Gains Broadly to Start New Week

By:

Published: Jan 6, 2020, 10:19 UTC

The British pound has advanced against all of the major currencies in early European trading and has erased losses from the prior session.

UK Services Sector Improves in December

Markit’s Services index was reported to rise to 50 in December to beat out the analyst estimate for a reading of 49.1. The data was welcomed by Sterling bulls after the latest manufacturing PMI data disappointed last week.

GBP/USD experienced volatile trading in the first week of the new year as a rally in the first half of the week was wiped out by a decline in the second half. This resulted in a bearish candlestick pattern on a weekly chart that stands to keep bears on guard in the week ahead.

But Sterling is showing strong upward momentum in the early day, gaining against all of its major currency counterparts. GBP/USD may have formed a meaningful bottom last week although the reaction around resistance it is currently facing will be important.

The week ahead should see some volatility in the currency markets with several data releases that stand to impact the pair. The highlight will tend to be the US jobs report which is scheduled for release on Friday.

Technical Analysis

GBP/USD shows mixed technical signals to start the week. Last week’s price action resulted in a doji candle on a weekly chart to signal bullish exhaustion. At the same time, the pair is showing strong upward momentum in the rise today which could keep the bears at bay once the US markets open.

GBPUSD 4-Hour Chart

Resistance is in play for the exchange rate. A horizontal level at 1.3145 comes from a weekly chart and is currently being tested. A break above 1.3157 would confirm a bullish break which stands to accompany upward follow through.

The US Dollar index (DXY) is under pressure today and the greenback is the weakest among the majors on the day thus far. However, from a broader perspective, DXY has been rangebound since finding a floor on December 31. A break from this range will tend to clarify the trend for GBP/USD and the majors in general.

Bottom Line

After a two-day decline, GBP/USD is showing renewed upside momentum.
Resistance at 1.3145 is in play with further resistance at 1.3157 that could limit the rally in the session ahead.

About the Author

Jignesh Davdaauthor

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.