GBP/USD Price Forecast – British Pound On Steady Range Bound Action Near Previous Session High’sThe Sterling is enjoying some lift on a softening Greenback, but Brexit angst is limiting buying interest.
Having collapsed to the lowest level since April 2017, the GBP/USD pair recovered swiftly and rallied around 250-pips intraday to finally end the day with modest gains. The early flash crash was on the back of safe haven-fueled interest in the US Dollar, which came after Apple lowered its revenue guidance due to slowing iPhone sales and weakness in China. The greenback, however, failed to preserve early gains and came under some renewed selling pressure, which was eventually seen as one of the key factors that helped the pair to stage a solid rebound. The buck largely ignored upbeat ADP report, showing that private sector employers added 271K new jobs in December, rather took cues from some dovish comments by Dallas Fed President Robert Kaplan, favoring a pause in the rate hike cycle. Adding to this, the disappointing release of ISM manufacturing PMI for December and falling US Treasury bond yields, with the yield on the benchmark 10-year T-bond touching its lowest level in a year, kept exerting downward pressure on the greenback.
Upside Move Limited Ahead of Brexit Parliamentary Vote
The pair finally ended the day near session tops, just below mid-1.2600’s and consolidated overnight strong up-move through early Asian session today. Market participants now look forward to the UK services PMI, anticipated to tick higher to 50.7 in December, for some short-term impetus. The key focus, however, will be on the closely watched US monthly jobs report, especially wage growth data, which tends to have a lasting effect on the USD and should produce some meaningful trading opportunities. Aside from macro data, investors are also focused on Brexit headlines as the House of Commons is due to vote on PM May’s broadly-maligned Brexit withdrawal agreement, where the halfway deal is expected to lose soundly while recent comments from Ex-Brexit secretary David Davis suggests that PM May could consider delaying the parliamentary approval once again this month. As of writing this article, GBP/USD pair is trading at 1.2635 up by 0.44% on the day.
Barring some short-term reactions to the latest economic data, traders are likely to commit themselves and refrain from placing aggressive bets ahead of the UK Parliament debate on the PM May’s Brexit agreement, set to resume in the week of January 7. This followed by the meaningful vote, planned to be held before January 21, will play an important role in determining the pair’s next leg of a directional move. When looking from technical perspective, bullish potential for the Cable remains firmly capped, and the pair is continuing to squirm on the downside of key resistance. The GBP/USD pair is poised to close the day with modest gains but the short-term picture continues to indicate that the upward potential is limited, as, in the 4 hours chart, the price remains below a bearish 20 SMA which extends its decline below the 200 EMA, while the Momentum indicator maintains a firm downward slope below its mid-line and the RSI tries to stabilize around 48. Expected support and resistance for the pair are at 1.2610, 1.2570, 1.2535 and