Market Overview

GBP/USD Forecast: Recovery Move Likely To Confront Strong Hurdle Near 1.3140 Area


The GBP/USD pair fell to one-month lows on Friday, weighed down by fears that UK PM Theresa May might be forced to quit her post. The pair gapped higher at the start of a new online trading week and has recovered to the 1.3100 handle on reports that the Conservative Party members who are trying to oust May as leader have been told to "shut up" by senior party members.

The British Pound also benefitted from a news report that the UK's Office for National Statistics (ONS) has led to inflation being understated and shall release a correction today. The data is expected to show that companies' employment costs have been rising faster than previously expected and reinforce expectations that a BoE rate hike action might come sooner than expected.

Meanwhile, investors now seemed to look past Friday's US monthly jobs report. Hence, renewed geopolitical concerns over the Korean peninsula kept the US Dollar bulls on the back foot and further collaborated to the pair's uptick through Asian session on Monday.

Focus now shifts to May's speech in the House of Commons today, where comments over Brexit talks should drive sentiment surrounding the British Pound and provide some fresh impetus amid holiday-thinned liquidity conditions.

Technically, the pair last week had confirmed a bearish break below a short-term descending trend-channel. The same was further reaffirmed by a follow-through weakness below an important support near the 1.3100 handle, marked by 61.8% Fibonacci retracement level of 1.2774-1.3657 recent upswing. Hence, the current pullback might still be categorized as a short-covering bounce from near-term oversold conditions and seems more likely to fizzle out near 1.3135-40 horizontal resistance. However, a strong follow-through buying interest has the potential to continue lifting the pair back towards reclaiming the 1.3200 handle.

On the flipside, weakness back below 1.3075 level could drag the pair back towards 1.3050 intermediate support, which if broken would turn the pair vulnerable to accelerate the fall towards the key 1.30 psychological mark. The downward trajectory could further get extended towards its next support near the 1.2965-60 region.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Forex FXStreet FXstreet.comForex Markets


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