GBP/USD Fundamental Analysis – week of February 27, 2017

GBPUSD continues to consolidate and range as it has been doing for several weeks now. There is a lot of volatility within this range and this gives the impression as though the pair is upto something but if you look at the larger picture, it is only just a series of bounces followed by a series of corrections with no specific direction or trend.

Look at the Larger Picture

This is only to be expected from this pair as it involves 2 currencies which have been in the top of the headlines over the last few months for a variety of reasons. While the pound suffers from the uncertainty over the Brexit process, the dollar suffers from the uncertainty over the policies of Trump and his team. But, while the markets have begun to get used to the ways and whims of Trump, the Brexit process, on the other hand, it likely to drag on till next year atleast and along with it, the uncertainty is also set to continue.

This is the reason why we have been saying that any bounces in GBPUSD should be viewed as an opportunity to sell rather than an opportunity to jump in with the longs. This is what we saw last week as well as the pair jumped towards 1.2550 due to dollar weakness across the board following the FOMC minutes. But it was met by some strong and quick selling of the pound and the pair finished around the 1.2450 region during the weekly close, well within its larger range that we have been mentioning.

Looking ahead to the coming week, we are likely to see some month end currency flows and so there is likely to be a lot of volatility in this pair due to that. We also have the preliminary GDP and unemployment claims data from the US as well as Manufacturing, construction and services PMI from the UK which should add to the volatility. But as said before, sell all bounces with a SL beyond the larger range.