GBP/USD Price Forecast – GBP/USD Signals Strong Bearish Bias Ahead of Key Brexit Proceedings

The GBP/USD pair came under some intense selling pressure on the first trading day of the New Year and erased all of its gains recorded over the past two weeks. The global flight to safety, amid mounting global growth worries, further fueled by disappointing Chinese macro data, underpinned the US Dollar’s relative safe-haven demand and was seen as one of the key factors weighing heavily on the major. The British Pound failed to attract any buying interest despite upbeat UK Markit Manufacturing PMI, which came in at a six-month high level of 54.2 for December. The overnight decline on risk averse trading saw the pair fall below 1.24 handle the lowest since April 2017. However the bearish pressure on major seems to have eased slightly ahead of European market hours on positive cues from Asian markets.

Brexit Continues to Play Major Role in GBP’s Price Dynamics

The pair managed to recover nearly 130 pips from overnight lows and is trading at 1.2550 down by 0.44% on the day as of writing this article. Investors are now on lookout for UK construction PMI, foreseen at 52.9 vs. 53.4 in the previous month, for some fresh impetus during London market hours. But main events of the day in focus of investors are US ADP NFP & ISM manufacturing PMI data scheduled to release in North American market hours which will provide significant volatility and also see considerable trading volume and liquidity since trading session opened for 2019. Moving ahead investors focus lies on US NFP & Fed Chair Jerome Powell’s speech for cues on Fed’s monetary policy outlook which will greatly affect short to medium term outlook of all USD denominated assets.

On UK market, investors continue to focus on upcoming UK Parliament debate on the PM May’s Brexit agreement and no-confidence vote on PM May which will greatly impact British Pound’s value and medium to long term outlook in broad market. When looking from technical perspective, last week’s strong positive momentum failed near 50% Fibonacci retracement of the 1.3175-1.2477 downfall. The ongoing slump has already achieved the bearish target – marking 61.8% Fibonacci expansion level of the mentioned slide and subsequent rebound, prompting some near-term short-covering move. With technical indicators still holding in bearish territory, any further recovery might confront some fresh supply and is likely to remain capped near the 1.2600 handle. On the flip side, the 1.2515-10 region now seems to protect the immediate downside and is closely followed by support near the 1.2480-75 region. A follow-through weakness back below the mentioned support levels might turn the pair vulnerable to head back towards challenging the 1.2400 round figure mark.