GBP/USD Daily Price Forecast – GBP On Consolidative Action Over Brexit Optimism

USD achieved a bearish breakout, but headlines inspired optimism surrounding Brexit and trade tensions which weighed down dollar helped GBP take on consolidative price action near previous session lows.
Colin First
GBPUSD Wednesday
GBPUSD Wednesday

GBPUSD pair saw a sharp slide yesterday that has given US Dollar the reigns for price action. Having declined below 1.30 handle, US dollar has now achieved breakout in its favor. US Dollar has been gaining momentum in broad market for four consecutive trading sessions and continues to trade strongly in broad market for fifth consecutive trading session today. Following disappointing UK PMI’s British Pound lost significant ground given the fact that Pound is already suffering in the broad market owing to Brexit uncertainties. PM May’s comments that UK will leave E.U with or without a deal on March 29 also continued to weigh GBP in the broad market. Mixed macro data outcome in the U.S. market had no impact on the price action of US dollar during American market hours which resulted in pair moving well below mid 1.29 handle.

Sino-U.S. Trade War Fear Halted US Dollar’s Rally

However, US President Donald Trump’s state of Union speech saw him blaming Chinese for loss of American jobs and wealth. This comes at a time when trade talks between two nations are in critical point of make or break scenario resulting in tensions surrounding Sino-U.S. trade talks booming in the market. As USD took a hit from Trump’s speech the pair managed to establish a stable rally near mid-1.29 handle during early Asian market hours post which price action has displayed a consolidative tone given lack of trading volume owing to most Asian markets closed for holiday celebrations. As of writing this article, GBPUSD pair is trading at 1.2940 down by 0.18% on the day. For now, the pair’s consolidative action is in favor of GBP as news of cabinet ministers meeting to delay Brexit hit market renewing hopes for soft Brexit, but the same is unlikely to last for long if no further updates on same hits market later today.

The pair is expected to continue range bound action during London market hours as UK calendar is silent for the day. However, the U.S. economic calendar is tightly packed with high impact macro data releases which could provide fresh impetus for price action in American market hours. U.S. calendar will see the release of building permits data, core durable goods orders & core retail sales data, and Preliminary GDP (QoQ) update. Positive reading in macro data outcome will result in USD resuming downward price action while dovish reading will likely have no impact on Greenback resulting in range-bound price action continuing across the day. Expected support and resistance for the pair are at 1.2925, 1.2900, 1.2880 and 1.3000, 1.3045, 1.3085 respectively.

 

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