Bottom line: GBPUSD long term structure continues to remain bullish against 1.1414 lows since March 2020. Over the medium term though, the currency seems to have carved a meaningful top around 1.3500 handle. Bears might be poised to keep intraday rallies capped below 1.3500 mark.

 Fundamental Outlook:

EURUSD had dropped by -1.77% over the last week closing around 1.1630 mark. The exchange rate has been under pressure since September 01, 2020. As risk assets declined, the safe haven US Dollar has managed to gin across major currencies. The exchange rate might remain under pressure with US Presidential debate, NFP event risks lined up this week.

FTSE had declined by -1.94% over the last week, as risk aversion continued. Dow Jones and SPX500 dropped around -2.0% and 0.97% respectively and US Dollar Index rose by +1.7% in the last week. Investor sentiment remains fragile over the additions US stimulus package and risk assets might continue its selloff over the next several weeks.

GBPUSD remained under pressure over the last week and managed to close at 1.2745, down -1.31%. The exchange rate might continue to be driven by Brexit developments as October 15, 2020 deadline approaches. An agreement must be reached by the above date to ensure smooth transition by December 31, 2020.

Technical Analysis:

GBPUSD continued its slide over the last week dropping through 1.2675 lows, before managing to pullback. The currency trades above 1.2770 mark for now and might be poised to produce a corrective rally towards 1.3150/80 levels, going forward. Bears might resume lower thereafter.

GBPUSD had remained in control of bulls since 1.1414 lows in March 2020 and managed to produce a religious rally towards 1.3500 handle. Also note that bulls had almost taken out a major past resistance around 1.3500 handle. A meaningful corrective drop might be underway towards 1.2200 levels.

Also note that fibonacci 0.618 of the above rally is seen passing through 1.2200 handle. High probability remains for a bullish bounce if prices manage to reach there. GBPUSD might be underway to produce a counter trend drop, before bulls are back in control.

Most traders might be preparing to initiate fresh short positions around 1.3150/1.3200 resistance zone with protective stops above 1.3500 handle. The projected targets are seen towards 1.2200 levels in the next several weeks.

Prepared by

Harsh Japee, Technical Analyst.

GBPUSD Chart

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