GBPUSD is currently testing a key area of interest as seen on its daily time frame, which could mean that the recent selloff could reverse. Stochastic is starting to move up from the oversold zone, indicating that selling pressure is exhausted.
A rally could take GBPUSD back up to its previous highs near the 1.7200 major psychological level eventually. A weak bounce might last only until the areas of interest around 1.6500 and 1.6700.
On the other hand, another run in selling momentum could push GBPUSD to the next Fib level near the 1.6000 major psychological handle. Further declines below this support zone could lead to a test of the 61.8% Fibonacci level, which is near the 1.5700 major psychological support.
GBPUSD Event Risks
There are several event risks lined up for GBPUSD this week, including the much-awaited Scottish independence vote. If Scotland is able to secure independence, the UK economy might be in for a bit of political and economic instability, which might lead to more pound weakness. Also due this week are the UK jobs and spending data, along with BOE minutes and inflation figures.
These events could determine whether GBPUSD will bounce or break off its current levels, particularly the Scottish independence vote. If economic data also supports the reaction to this event, GBPUSD moves could last longer and might determine the trend for the rest of the year.
If Scotland stays in the UK and the data supports a bullish pound bias, the pound could see a strong and sustained rally. On the other hand, an exit by Scotland and downbeat data from the UK could lead to a strong break below 1.6200 and further losses for GBPUSD. Meanwhile, mixed outcomes could still lead to a small relief rally for the pound or more range-bound movement for the next few months.
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