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GBP/USD Daily Price Forecast – USD Gains Upper Hand on Rising Treasury Yields as GBP Suffers From Brexit Woes

By:
Colin First
Published: Aug 29, 2018, 06:37 UTC

US Q2 GDP and core inflation data eyed for near-term trading opportunities.

GBP/USD daily chart, August 29, 2018

The GBPUSD pair has found some support after steady decline in late North American and early Asian market hours on bloomberg report that the Brexit deal is now seen likely by mid-November. A mutually acceptable brexit deal if finalised before deadline of March 2019 could provide GBP with some bullish support. Meanwhile, the renewed weakness seen around the US dollar amid US-China trade spat and profit-taking ahead of the USQ2 prelim GDP release also helped cap the losses in Cable. The US dollar index seems to be near flat moving around 94.80 levels in Asian market hours. The steep decline in GBPUSD pair as it tested 1.29 handle during north american market hours was result of USD gaining bullish influence from rising U.S. yields and upbeat U.S. consumer confidence data which triggered broad-based short covering in the greenback. As of writing this article, the GBPUSD pair is trading at 1.2855 down 0.13% on the day.

US Macro Data to Drive Momentum for GBPUSD Pair in Short Term

However, it remains to be seen if the major can rebound from current price levels to retest 1.290 price handle amid a data-empty UK docket as the GBP markets remain waryof Brexit negotiations. The longer timeframe (previously October deadline) to reach the Brexit deal could be another indication that negotiators are struggling to make headway, and the risk is that the closer talks run to the UK’s exit on March 29, the greater the chance that there won’t be a deal. Also, an uptick in the US Q2 GDP growth figures could lift the sentiment around the buck, in turn refueling the decline in the GBP/USD pair. Besides, the US PCE inflation and July pending home sales data will also have a significant impact on the dollar trades.

Technically, the pair presents a neutral stance, having once again being rejected by sellers around the 38.2% retracement of the July/August decline. In the 4 hours chart, the pair is holding above a flat 20 SMA, while technical indicators head modestly lower but remain within positive levels. The 23.6% retracement of the same decline at 1.2835 is now a relevant support as once below it, the pair could resume its bearish trend. Expected support and resistance for the pair are at 1.2835, 1.2800, 1.2770 and 1.2935, 1.2960, 1.2990 respectively.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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