After the sharp rally in the past couple of days, forex traders noticed that GBP/USD is now stalling at a major psychological resistance level, which is also around the yearly highs at 1.7000. Stochastic is moving down, which means that pound bears are ready to take control of price action.
A selloff could last until the next major psychological level or the 1.6900 mark, which would act as support for the pullback and lead to forex traders jumping on the long pound trend. A deeper correction could last all the way until the 1.6700 previous month lows.
On the other hand, a strong upside break would mean that more gains are in the cards for this currency pair. Of course, this depends on how the upcoming UK events (CPI, retail sales, BOE minutes) turn out and whether or not they support an earlier tightening cycle from the BOE.
Going long above the 1.7000 handle with a wide stop and a large long-term profit target in case the UK events are bullish for the currency could be a good swing trade setup. Shorting on a downside break of 1.6950 could pave the way for a short-term trade until the 1.6700 support zone.
Forex Traders Watch GBP/USD Consolidation
Recall that BOE Governor Mark Carney previously hinted that interest rate hikes might take place sooner rather than later, as home price increases are pushing inflationary pressures higher. Data from the UK economy has been strong, particularly in the labor market.
As for the US, the upcoming FOMC interest rate statement could still have a huge say in dollar price action. After all, Fed Chairperson Yellen and her group of policymakers might give more hawkish comments while deciding to maintain their taper pace.
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