Fundamental Analysis
GBPUSD fell sharply after hitting a fresh weekly high above the 1.3200 round-figure resistance against the US Dollar (USD) during Friday’s North American session. The GBP/USD pair fell as the US Dollar rebounded strongly following the US (US) Non-Farm Payrolls (NFP) data for August. The US Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, recovered strongly to near 101.40 after falling to near 100.60.
The short-term outlook for the British currency remains upbeat recently as investors expect the BoE’s policy easing cycle to be shallower than that of other central banks.
The main reason behind the strong speculation of a gradual BoE easing cycle is that the economy is performing better than previously expected and the fact that inflation in the services sector remains high. In the UK economic calendar next week, investors will focus on the Employment data for the quarter ending in July and the monthly Gross Domestic Product (GDP) data for July. Both of these figures could be key to determining what the BoE will decide to do with interest rates when it meets later this month.
Technical Analysis
The NFP pullback is approaching the 1.308 support zone. The uptrend is still strong with a possible retracement to the 1.0 Fibonacci around the 1.301 zone to bounce back to wave 5 and complete the bullish wave pattern. 1.334 would be a nice Fibonacci resistance zone where we can look at the reaction to execute the SELL signals. In the opposite direction, the Dow breakout of wave 1 formed a strong support level around 1.288. The EMA 34 is gradually decreasing in slope compared to the EMA 89, showing that the market structure is leaning towards the upside but not as strong as last week.
Support: 1.301-1.299
Resistance: 1.322- 1.334
Trading Signals
BUY GBPUSD: 1.301-1.299 Stoploss 1.297
BUY GBPUSD: 1.288-1.286 Stoploss 1.284
SELL GBPUSD 1.334-1.336 Stoploss 1.338