GBPUSD Bearish Outlook Solid Despite Recent Rebound

Daffa Zaky  |


The GBP/USD currency pair has enjoyed a significant rebound over the last couple weeks after recovering from a new YTD low of about 1.3054 achieved late last month. The pair on Monday July 9, hit a new 3-week high of about 1.3363 before momentarily pulling back to trade at around the 1.3250 level.

The currency pair’s movement over the last two weeks was particularly driven by the recent political events in the U.K. coupled with mixed U.S. jobs data that left some investors with a few questions about the stability of the U.S. economy.

In the U.K., resignations by Brexit secretary David Davis, Steve Baker, and Suella Braverman signaled a major split in the U.K. Prime Minister, Theresa May’s proposed Brexit plan, and this is believed to have created a stonewall ceiling, which effectively limits bullish expectations on the GBP/USD currency pair.

Therefore, the upside triggered by the tepid U.S. jobs data released early this month is expected to be quickly erased in the coming days as the greenback regains ground on Sterling.

So, what does this mean for traders looking for profitable opportunities sometime this week? Well, looking at the 4-hourly chart below, there are notable opportunities for both the bulls and the bears in the coming days. And while profits may not be a lot following recent consolidation zones, traders could potentially make anything between 30 pips to 50 pips trading either side of the pair through Friday.

GBPUSD H4 Chart July 10, 2018

Looking at the chart above, bullish traders interested in short-term trading opportunities can target profits at (R1) which is well positioned at key level 1.3300. Based on the current rate of about 1.3250, this could result in profits of about 50 pips. More bullish profits can also be netted at (R2) and (R3) at about 1.3360 and 1.3460 resulting in profits of about 110 pips and 210 pips respectively.



However, the current momentum appears to be with the bears and they could be looking to net profits at key support levels (S1) and (S2) at 1.3200 and 1.3100, respectively. Some of these opportunities could be realized within a few days while others could mature in a week or two. To bring clarity to the intermediate trading opportunities, as well as, the long-term opportunities, the daily chart below could be used to paint a clear picture.

GBPUSD Daily Chart July 10, 2018

First, the GBP/USD currency pair appears to be on a bearish trending channel, which incidentally formed after the pair broke out of a modestly upward trending wedge. This breakout from the bullish channel forms parallels with a previous bearish break witnessed between late 2016 and early 2017 as demonstrated on the daily chart above.

That previous bearish breakout is what eventually triggered the diagonal bullish channel. Now, if the previous low is to be achieved in the coming weeks and months, then this implies that even given the expected series of rebounds and pullbacks, the bearish outlook remains strongly supported.

As such, traders looking for longer-term trading opportunities would be more interested in the events that are likely to happen on the way down rather than the expectations upwards. Therefore, bears will be looking at opportunities at (S1), (S2), and (S3) on the daily chart which also coincide with key support zones at 1.3100-1.3000, 1.2800-1.2700, and 1.2500-1.2400, respectively.

Also, when looking at the pair on the daily chart it indicates that an upward rebound in the intermediate timeframe is expected before the GBP/USD pair finally descends to hit new YTD lows. This presents an opportunity for the bulls, which can be found at (R1) a key resistance zone (1.3400-1.3500). And should the GBP/USD pair go against the odds and continue upwards, then this would be a major trend reversal, in which case, bullish traders can begin looking at opportunities around (R2) and (R3), which take place at around 1.4000 and 1.4400 trading zones respectively.

It is good to note that the GBP/USD currency pair last traded within that range early this year, and again in April, but has not hit those heights for the last two and a half months. However, this also shows that it is not inconceivable to imagine the pair rallying back trade above 1.4000 level.

Nonetheless, a lot will depend on economic data from the two economies with geopolitical issues like trade wars between the U.S. and China and the current Brexit impasse seemingly appearing to have no major effect on the GBP/USD currency pair.

This post appeared first on FXDailyReport.com

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Comments

Emerging Growth

NXT-ID Inc.

Nxt-ID Inc provides products, solutions, and services that have a need for biometric secure access control. Its lines of business include mobile commerce; law enforcement and biometric access control applications…