Today we would take a detailed look at the GBP/USD currency pair. It has been exhibiting bearish symptoms for a while now, failing to overcome the strong resistance region around 1.30.
The pound, of course, is still low. It dropped dramatically last year after the Brexit vote, and although its descent has slowed down, it’s still far away from its highs in 2015. Today we expect some news from the United Kingdom regarding interest rates (which the UK is expected to increase soon) and other issues pertaining to monetary policy. These could potentially give the GBP a long-awaited boost versus major currencies. Still, there is a lot of political uncertainty troubling the United Kingdom. The UK is in the first stages of Brexit negotiations with the European Union, a time that calls for strong leadership - but instead, British media are littered with speculation about the possible resignation of Theresa May. An inability to form a strong government with a well-supported Prime Minister would not bode well for the British pound.
On the other hand, last week produced some positive economic statistics about the United States, which gave the dollar a push. We’re also awaiting a new job openings report today, which is supposed to show a decrease from before. There will also be an important announcement by the Federal Reserve regarding interest rates (there are more increases expected, but their possible dates seem unpredictable to traders right now).
Overall, due to the particular situation with both currencies, we would likely see some moderate (to strong, if May resigns) volatility with the GBP/USD pair. However, the dollar would most probably be the winner here, at least for the next few days.
We could see the pair drop to the support levels at 1.27-1.28. Likely the GBP/USD would sink below the EMA 20 to touch these levels. In case we see a rebound from the support upwards, then we can place a buy order on the GBP/USD with a target at 1.3370. Alternatively, we should sell the pair with a target of 1.2550.
