THE GBP/USD OVERVIEW

The GBP/USD is a ticker for the dollar-pound exchange. This pair is part of the “majors” representing the currencies with highest trading volume. Apart from being one of the ancient, the pair is liquid and features tight spreads as compared to the minors. The GBP/USD currency has had the GBP as the base currency while the US dollar has been used as the quote currency. This means that for every single time, the GBP/USD is the amount of US dollars equivalent to 1 pound. The following factors influence this pair.

Bodies and factors affecting GBP/USD

Monetary policy is one of the main factors that affect the GBP/USD. In the UK, the bank of England is responsible for the release of interest rates and related monetary policies. In the US, the Federal Reserve releases the interest rates eight times a year. The USD is the biggest reserve currency; these eight days are very critical.

Employment numbers

The employment numbers are very crucial for both the economies as they guide the monetary policy to be adopted. Both the UK office of national statistics and the US Bureau of labor statistics will typically release the data on a monthly basis.

Political news

The GBP/USD over the past has proven to be extremely sensitive to political news, therefore. Traders ought to be cognizant of the political story in both nations. The pair is also correlated to the EUR/USD but correlated negatively to USD/CHF.

Fundaments analysis of GBP/USD

The GBP/USD dropped last Friday New York session after a strong NFP towards the end of the week. By the close of day, GBP/USD was down 85 pips down the day’s high hovering at around 1.2911. The NFP headline was above the expectations of many; the unexpected positive growth is what surprised the market.

Monday the 11th, the pound was up especially after EU officials suggested that Brexit is realistic and it could be realized in 6- 8 weeks. As negotiations continue, a lot of activity is expected in the market in the next few days. The Pound is appearing as if it may come out strongly as the market look for forward for the negotiated Brexit deal and not a “no-deal” Brexit.

Tuesdays the 12th, the currency was extremely noisy as different European ministers gave their comments. However, the overall trend of the currency looks bearish. The Gamesmanship seemed to continue especially after an EU official was quoted telling the UK to tread carefully and to be careful not to cross the red line. Many events in the media surrounding the Brexit seem to be affecting the pound.

With even a better-than-expected US PMI uptick, the pound did not receive the much-anticipated boost. The UK had a robust service sector in the month of August, in the views of many; the currency was expected to perform well, but the mood towards the pound remains bearish.

Uncertainties surrounding the Brexit as well the future of Theresa May's plan kept the GBP under pressure. The odds for a no-deal Brexit are still eminent and uncomfortably high. However, a positive PMI shows a promising British economy.

The weakening Chinese services PMI are putting a lot of pressure on GBP against the USD. With the world second largest economy slowing in the global arena, the haven USD position is apparently improving. The trump threats to impose tariffs on imports, especially from China, are likely to shape the pair’s next move.

While the speculation over the Brexit remains a major drag to the pound, developments within the Bank of England will be something to watch. The confirmation of Governor Mark Carney continued stay until January of 2020 may cause the GBP to trend higher in the weeks to come.

GBP/USD Technical analysis (Daily)

The currency breach of 1.3042 is an indication that the corrective rebound beginning from 1.2261 is resuming. We expect the upside to be limited by the 1.3316 Fibonacci level completing the corrective rise. The downside, if the minor support at 1.2896 is broken will indicate the completion of the correction of the rebound beginning from 1.2661.

In a broader perspective, the medium term rebound beginning from 1.1946 that was 2016 low ought to have completed at 1.4376 especially after rejection from the 55 months EMA. The momentum and structure of the fall from 1.4376 indicate a resumption of the long-term downward trend. A break of the 1.3316 would bring strong rebound to the 61.8% retracement at 1.3721. This would lead to the eventual fall from 1.4376 and a probability of hitting 1.1946, but that depends on the strength and intensity of the corrective rebound from 1.2661. Please review this image, you can open your demo trading account and evaluate the levels as indicated below.

GBP/USD Technical analysis (Weekly)

The GBP/USD showed a lot of volatility in the previous week bounded in the ranges of 1.2784/3042. On the upside, if the 1.3042 is broken, it will have resumed the rebound from 1.2661 targeting the 100% retracement of 1.2661 to 1.3042 starting from 1.2785 at 1.1365. Such a rebound seems like a correction, the upside then should be limited by the 1.3316 Fibonacci level in order to complete the rise bringing it near reversal. The downside, if the 1.2784 is broken will retest the low of 1.2661. Please review this image, you can open your demo trading account and review the levels as indicated below.

In a broader perspective, medium term rebound that began from 1.1946 a 2016 low ought to have completed at the 1.4376, after the rejection of 1.4099. The momentum and structure of the fall from 1.4376 indicates a resumption of the long-term downward trend. A break of the 1.3316 would bring strong rebound to the 61.8% retracement at 1.3721. This would lead to the eventual fall from 1.4376 and a probability of hitting 1.1946, but that depends on the strength and intensity of the corrective rebound from 1.2661. Please review this image, you can open your demo trading account and review the levels as indicated below.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes