- Summary:
- The sell-off on GBPUSD came to an end as the currency pair found support on the SMAs and as profit-taking on long USD positions. But will support hold?
GBPUSD surged higher on Friday. The currency pair opened at 1.2989 and bottomed at 1.2966 during the Asian session. The currency pair then steadily traded higher to tap a new intraweek high at 1.3116 before finishing Friday’s trading at 1.2079.
Profit-Taking on Long USD Positions
There were no reports released from the US and the UK on Friday. There was, however, broad dollar weakness as investors unwind their long dollar positions before the start of the New Year. The British pound benefitted from this wave of profit-taking especially since GBPUSD came under heavy selling pressure after the UK general elections was concluded.
Economic Data Scheduled from the UK and the US Today
For today, we have a few reports due from the two countries that could dictate the direction on GBPUSD. At 9:30 am GMT, data on new mortgages issued by High Street banks for November is due. It is anticipated to show an uptick of 41,300. Then at 2:45 pm GMT, the Chicago PMI for December is eyed to print at 48.2. Finally, at 3:00 pm GMT, pending home sales for November is seen to come in at 1.5%.
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GBPUSD Outlook
On the weekly chart, we can see that GBPUSD formed a hammer around 1.3100 where there is a confluence of support. For one, the 100 SMA and 200 SMA coincide at this price level. Second, it aligns with the area between the 23.6% and 38.2% Fib levels when you draw the Fibonacci retracement tool from the low of September 1 to the high of December 8.
In forex trading, a hammer is widely considered as a bullish confirmation signal. This means that a rally above last week’s high could mean that GBPUSD is on its way to retest its September highs at 1.3520. On the other hand, if this week’s candle closes below last week’s low, GBPUSD could fall to the 61.8% Fib level at 1.2558 where the broken falling trend line could provide the currency pair with support.