GBPUSD is moving inside a rising channel on its daily time frame, indicating that the uptrend is still intact. However, price is testing the channel resistance at the 1.7200 major psychological level and may be due for a quick correction before heading any higher.
Stochastic is indicating overbought conditions, which means that a drop could take place sooner or later. In that case, GBPUSD could pull back to the 1.7000 major psychological level, which is also near the middle of the channel.
If you are strongly bullish on this pair, waiting for a correction until the mid-channel area of interest and setting a stop below the channel support could yield a good return on risk for a trend play. If you’re looking to short on the countertrend move, setting a tight stop above the channel resistance could work.
GBPUSD Forex Forecast
The BOE interest rate decision is coming up this week and this might be the biggest catalyst for GBPUSD. Governor Carney is expected to reiterate their plans to start tightening monetary policy this year in order to keep housing inflation under control. His recent testimony showed that he is still pushing for a sooner rather than later rate hike and this point might be emphasized in the upcoming policy statement.
Meanwhile, the US dollar is also enjoying support from a better than expected NFP report released last week. This renewed expectations of a rate hike from the Fed around six months after asset purchases end, as Janet Yellen hinted at in one of their FOMC statements this year.
However, a strongly hawkish BOE statement might lead to an upside breakout of 1.7200 for GBPUSD and more gains for the pair. On the other hand, a downbeat BOE statement might lead to a selloff back to the mid-channel area of interest or at the 1.7000 handle.
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