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GBP/USD Fundamental Analysis – week of January 29, 2018

By:
Colin First
Published: Jan 27, 2018, 08:15 UTC

The pair has been moving higher over the last few weeks and it remains to be seen whether it would be able to maintain its bullishness

GBPUSD Weekly

The GBPUSD pair continued its fabulous run which has seen it rise by over 800 pips over the last few weeks without much of a correction. The pound has been able to tap into its inherent strength and this, along with the weakness in the dollar that has been seen across the board, has helped it to push higher over the last few weeks. But towards the end of the week, it corrected lower as the dollar managed to regain some strength and it remains to be seen whether this is a correction of the uptrend of a full reversal.

GBPUSD Continues Forward

The pound has been buoyed by the talks and reports of the Brexit being a soft one rather than a hard one which was what was initially expected. Though none of the Euro leaders have publicly favored giving a soft Brexit, there have been reports that the UK would be able to get access to the Eurozone trade just like how Norway has and this, if it turns out to be true, would be highly beneficial for the pound. The incoming data from the UK has also been steady over the last week and this has also helped to add some strength to the pound.

GBPUSD Daily
GBPUSD Daily

On the other hand, the dollar is clearly on the backfoot though the economic data from the US has been steady. Last week, we saw the treasury secretary say that he prefers a weak dollar and this added to the selling in the dollar that we have been seeing over the last few weeks. This helped to push the pair through the 1.43 region for a brief while though the dollar managed to recover some ground later in the week and the pair closed the week just above the 1.41 region.

There are signs of weakness in the pair and the coming week would likely determine whether the dollar would be able to regain its strength. The focus would clearly be on the dollar in the coming week as we have the NFP data coming in later in the week. The dollar bulls would be looking forward to this data and look for signs of the strength in the economy. This is likely to be the base on which the Fed would make a decision on its next rate hike and hence the dollar bulls would want this stronger so that they can keep alive their hopes for a hike in March. Also, it is going to be the month end in the coming week and so we are likely to see a lot of trade flows and this is also likely to affect the pound. It should be an interesting week ahead.

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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