Technical indicators suggest that bears could take advantage of this situation and thus force the rate lower today. This movement, however, could be very limited, as the 200-hour is located nearby. In case this line is breached, the next downside target is the 1.38 mark.
By and large, the general tendency of the Pound, which is expected to prevail in the market this week as well, is upwards. Thus, traders are likely to see appreciation towards a trend-line or the weekly R1 at 1.3910 and 1.3943, respectively, during the first part of the week.
As previously expected, the Pound continues moving closer to a downward-sloping trend-line located near the 1.3910 mark for the third consecutive session. A 20-pip surge mid-Monday added some ground to the bullish sentiment, thus pushing the rate up to the 1.39 mark.
The Asian session began with a slight decline for the Sterling that is likely to continue until the British Annual Budget Report and the US CPI published at 1130GMT and 1230GMT, respectively, introduce changes to the overall market sentiment.
In general, it is likely that fundamentals, especially the second event, dominate the market during the second part of the day. A possible trading range is the 55– and 100-hour SMAs and the weekly PP near 1.3850 from below and the weekly R1 and the monthly PP at 1.3930 from above.
The market was calm on Tuesday morning, as traders were awaiting the British Annual Budget report and the US inflation data. The first event did not cause any reaction, while the latter shook up the market significantly with a 100-pip surge within a couple hours. The bullish sentiment was likewise strengthened by Trump’s unexpected decision to fire the US Secretary of State.
As a result, the pair breached a six-week down-trend, the weekly R1, the monthly PP and the 38.20% Fibo retracement. The following hours were once again spent without major advances, thus suggesting that some correction south could be possible today. The southern limit for today could be the the aforementioned pivot points at 1.3930.
Subsequently, the rate is expected to surge up to the senior channel circa 1.40.
Even though the general tendency for the pair was southwards on Wednesday, GBP/USD failed to make a notable advance in this direction. From the upside, the Sterling was restricted by a two-week high of 1.40, while support was provided by the 38.20% Fibo at 1.3960.
As apparent on the chart, the pair is currently trading in several channels that flash opposing signals. However, technical indicators demonstrate that some upside potential still exists in the market, thus favouring a rate increase up to the 1.4012 territory where the weekly R2 and is located.
This appreciation is unlikely to be as steep as the drawn one-week channel, thus pointing to a more gradual increase today. Meanwhile, a possible fall should not exceed the weekly R1 and the monthly PP at 1.3830.
The Sterling continues to depreciate against the US Dollar for the second consecutive session. This movement has been constrained in a rather flat channel down.
In case the current sentiment is to persist, the pair is likely to reach the lower boundary of a medium-term channel circa 1.39. The 200-hour SMA is likewise located near this area. Technical indicators, however, are more favouable of the bullish scenario.
At the time of this analysis, the pair was trading between two strong barriers one of which being the 55-hour SMA and the 38.20% Fibo retracement at 1.3960. The prevalence of bulls would result in a breakout of this resistance and a subsequent surge towards the three-week high at 1.40.
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