GBPUSD Forex Forecast – Retracement to Broken Trend Line?

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GBPUSD Forex Forecast - Retracement to Broken Trend Line?

GBPUSD Forex Forecast - Retracement to Broken Trend Line?

GBPUSD recently broke below a rising trend line connecting the recent lows, signaling that a downtrend is in order. Price dipped close to the 1.5000 major psychological level before pulling back up, indicating that a retracement might take place before the selloff takes hold.

In addition, stochastic is heading north, which means that sellers are taking a break and letting buyers take over from here. RSI is also pointing up, confirming that a rally might happen.

Using the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the broken trend line around the 1.5300 major psychological mark. The 100 SMA is still above the 200 SMA for now but a downward crossover seems possible, potentially showing that the path of least resistance is to the downside.

GBPUSD Fundamental Factors

Event risks for this trade this week include the release of UK jobs data, which might show a 1.6K increase in claimants. Employment growth has slowed down in the economy, which suggests the possibility of a downside surprise. In addition, the BOE announcements have been less hawkish than usual, hinting that the UK might be hitting some road bumps.

As for the US dollar, the retail sales report is up for release this week and analysts are eyeing a rebound. After all, jobs data came in stronger than expected for October so the upbeat consumer confidence probably spurred stronger spending figures. In that case, the dollar could see more upside, as the Fed moves closer to hiking rates in December.

With that, the retracement might be a shallow one, as the 38.2% Fib also lines up with an area of interest or support from last month. Price could turn upon hitting resistance at the 1.5150-1.5200 levels, pushing it back down to the previous lows or much lower.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com