GBP/USD Daily Fundamental Forecast – January 31, 2018

We had mentioned in our forecast yesterday that the GBPUSD pair was likely to find some strong support in the 1.40 and that this region was expected to be the line in the sand as far as the bulls and the bears were concerned. This turned out to be true as the pair dipped into the 1.40 region yesterday and even went below that for a very brief while before bouncing from there.

GBPUSD Bounces Hard

The buying and the bounce from there has been pretty strong and this has led the pair higher towards the 1.41 region and beyond where it trades comfortably as of this writing. The strength of the buying is an indication of how much buying is present in the region but it is also important for the traders to note that we are at the end of the month and hence the prices are likely to be driven by the month end flows and that any moves during this time should be taken with a pinch of salt.

There has not been many changes fundamentally and economically over the last few days, which is expected towards the end of the month. Hence, these kinds of large moves are not in tune with the general trend and this indicates that these moves are driven more by the flows than by anything else. That is why it is important to wait and watch these flows as they are likely to continue during the course of today as well as we head towards the end of the month.

Looking ahead to the rest of the day, we have the ADP employment data from the US but nothing from the UK as far as economic data is concerned. The ADP data is considered to be a precursor to the NFP data that is going to come in on Friday and traders would be expecting some strong showing in the data to keep alive their hopes of further and quick rate hikes from the Fed in the coming months. The market would want the Fed to hike more than 3 times this year but for that to happen, the data needs to be very strong.