Bottom line: GBPUSD long term structure continues to remain bullish against 1.1414 lows print in March 2020. Over the short term though, the currency might have carved a meaningful top around 1.3500 handle and might push towards 1.2200 levels.

 Fundamental Outlook:

EURUSD has been trading in a range between 1.1730/50 and 1.1910/20 since last few sessions. The exchange rate risen to 1.2010 levels early this month and might come under renewed selling pressure around 1.1930/50 mark in the near term. If global indices manage to rally in the near term, it could boost the risk associated exchange rate as well, pushing through 1.1950/60 handle.

FTSE had dropped by -0.81% on Friday, closing around 6000 mark. Global indices closed in the red with Dow Jones down (-0.88%), SPX500 (-1.12%) and DAX (-0.70%) respectively. FTSE futures trade marginally low at 5988 as we prepare to publish. Investor sentiment continues to remain vulnerable over Brexit uncertainties and further lockdowns over COVID-19 infections.

GBPUSD has dropped sharply from close to 1.3500 highs on September 01, 2020. The exchange rate trades around 1.2960 as we prepare to publish. It might face further selling pressure towards 1.3200/1.3300 levels over the next few trading sessions, if US Dollar continues to gain. Brexit uncertainties would only add more pressure.  

Technical Analysis:

GBPUSD continues to remain in control of bears after hitting major resistance just below the 1.3500 handle early this month. The currency had dropped through 1.2760 lows over the last week before pulling back. Bears might remain poised to resume lower from 1.3200/50 levels going forward.

GBPUSD managed to carve a religious uptrend (higher highs and higher lows) since 1.1414 lows through 1.3483 highs respectively. Also note that a major past resistance at 1.3516 was almost taken out before reversing sharply lower. This might call for a meaningful corrective drop towards 1.2200.

Further, also note that fibonacci 0.618 retracement of the entire rally between 1.1414 and 1.3483 is seen through 1.2200 levels. Hence probabilities would remain high for a bullish bounce, if prices managed to drop through that mark.

Most traders might be preparing to initiate fresh short positions around 1.3200/1.3300 resistance zone, with a protective stop above 1.3500 and projected target towards 1.2200 respectively. Bulls might prepare to be back in control around those levels.

Prepared by

Harsh Japee, Technical Analyst.

GBPUSD Chart

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