GBP/USD Daily Fundamental Forecast – January 30, 2018

The GBPUSD pair has made its way towards the 1.40 region as we had predicted in our forecast yesterday. After having made its way through the 1.43 region during the course of trading last  week, it has been bitten by the dollar bug and that has led to a correction lower in the pair. This is not only a correction brought about by the profit taking from the large investors but also by a growth in the strength of the dollar.

GBPUSD Moves Towards 1.40

This dollar strength set in towards the middle of last week as Trump said that he believed that the dollar would be strong due to the incoming data. This has taken the wind out of the bull run in the pair and helped the dollar to move higher and we have seen the pair move lower from above the 1.43 region to around the 1.40 region as of this writing. It remains to be seen whether this is just a correction of the large bull run, which carried the pair higher by over 800 pips, or whether this is going to turn out to be a full reversal.

The region around 1.40 would be a key test for the bulls and as long as they are able to maintain the prices above this region, then we should expect the bull run to continue unscathed. But if this region is broken through below, then we should see the pair correct even further and it may even lead to a full scale reversal. The dollar has been supported by the anticipation that the incoming data in the coming weeks would be strong and that this would help the Fed to consider more than the 3 rate hikes that the market expects.

Looking ahead to the rest of the day, we do not have any major economic news or data from the US and the UK but we are heading towards the end of the month which would mean that the price action is likely to be dominated by month end flows. So traders need to be careful, especially around the time of the London fix, as the price action could go against the trend at that point of time.