GBPUSD
GBPUSD recouped some of its losses in yesterday’s trading as headlines were quiet for updates on the US-Iran conflict. The currency pair jumped around 100 pips from its intraday low to 1.3173. By the end of the New York session, GBPUSD had settled at 1.3163, up 80 pips from where it opened for the day.
Market participants had probably braced for the worse yesterday after Iran promised to retaliate against the US last week. However, aside from the usual verbal threats from US President Trump, there were no significant development the US-Iran conflict. Trump had warned Iraq yesterday that it would impose sanctions if the country expels US bases within its borders.
While there were no economic report released from the UK yesterday, GBPUSD found some bids following reports that a Chinese delegation is preparing to go to the US. A report from the South China Morning Post that that the US and China would soon sign their phase one deal on January 13. While this may not have been a surprise (speculations that the deal would be signed in mid-January had started last month), the news was a welcome relief to investors who have been worried about geopolitical tensions.
Today, the forex calendar is still blank for top tier data from the UK. This means that GBPUSD will likely take its cue from two things. The first is economic data from the US. At 3:00 pm GMT, the ISM non-manufacturing PMI is expected to print at 54.5. A better-than-expected figure could strengthen the dollar and push GBPUSD down. Second, market sentiment could shift back to risk aversion if tensions in the Middle East escalate again. Consequently, this could be bearish for GBPUSD.
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On the hourly time frame, we can see that the rally on GBPUSD yesterday was enough for the currency pair to recoup some of its losses to the 50% Fib level (when you draw the Fibonacci retracement tool from the high of December 31 to the low of January 3). Buyers were also able to push prices back to the broken trend line and the neck line of the head and shoulders chart pattern. A bullish close above 1.3170 could mean that there are enough buyers to push GBPUSD above this confluence of resistance. You can then eye the currency pair’s December highs at 1.3283 as the next ceiling.
On the other hand, a bearish close below yesterday’s New York session lows at 1.3132 could mean that GBPUSD may soon fall to support at 1.3062.