GBPUSD has been steadily moving lower, as a descending trend line can be drawn to connect the recent highs of price action. At the same time, stochastic is indicating overbought conditions, suggesting that sellers could take control of price action after the pullback is completed.
GBPUSD could find resistance around the 1.5900 major psychological level, which lines up with the trend line and the 100 simple moving average. Take note that the 100 SMA is moving below the 200 SMA, confirming that the downtrend is intact.
GBPUSD Forex Forecast
MACD is still heading higher though, which means that there may be a bit of buying momentum left before the selloff resumes. Stops could be placed past the 200 SMA, which might serve as the line in the sand for any corrections. An upside break past that area could be the start of a reversal.
There are no event risks for this GBPUSD setup today, although traders might be pricing in expectations for top-tier releases later on this week. Risk appetite seems weak with geopolitical tensions flaring once more, putting the odds in favor of another leg lower.
Bear in mind that, while the latest US NFP reading was a disappointment, underlying jobs indicators showed promising results and some reached record levels. This should keep the Fed on the path to tightening monetary policy with a rate hike sometime next year. On the other hand, data from the UK hasn’t been very stable, leading many to speculate that a potential BOE rate hike will be delayed. After all, the UK central bank is also concerned about the potential impact of a euro zone recession on the economy.
However, a strong rebound in risk sentiment and profit-taking could lead to a sharp recovery for GBPUSD, possibly past the 1.6000 major psychological level. This appears to be a less likely scenario, but it wouldn’t hurt to set stops around that area.
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