Corrective Bearish Scenario: Sells below 38680 with TP1: 38560, TP2: 38500, TP3: 38432 Continuation Bullish Scenario: Buys above 38816 with TP: 39000
GBP/USD: gravitate downwards or keep up?
2020-10-20 • Updated
Since July, the movement of GBP/USD has been contained between 1.27 and 1.34. At the beginning of September, the GBP reached a high of 1.34 against the USD while the stock market was seeing its new highest high, and things seemed pretty fine around. Later on, September saw the currency pair drop to the 200-MA at 1.27. In corrected upwards, getting back some of the gain as high as 1.30 but is not stable over there – and there is little surprise in it. Virus, Brexit, and all the related issues are pressing on the British pound.
Technically, higher lows suggest that the trend will be still aiming upwards in the mid-term. Alternatively, going below 1.29, crossing the 100-MA, 1.28, then the 200-MA at 1.27 would be sure signs that the uptrend is exhausted and bears are pressing to aim at 1.23. Is it possible? Yes, depending on the fundamentals.
Fundamentals come to how Brexit goes, of course, but much more than that – how the economic recovery goes in the UK against that of the US. And in the UK, things look pretty bad. The unemployment surged as high as ever, the restrictions are being reinforced, and the economy is slowing down the recovery. Brexit uncertainty is only on the top of that pile making things worse, but not being the “main evil” for the pound. In the meantime, the US recovery seems to be going faster although the recent spike in unemployment alarmed the market as well. In any case, the USD is enjoying relatively high demand while the GBP is hanging in the balance.
Therefore, go for the mid-term strategy: follow how Brexit evolves – that should be clear within a week or so – and watch the technical levels from the downside. If no deal or further dragging of the UK-EU talks loom on the horizon, GBP/USD will likely gravitate downwards. The technical levels lying below will let you know when and whether you should prepare for a below-1.27 bearish strike.
Bullish Scenario: Buy between 17515 and 17600 with TP1: 17681; TP2: 17720 intraday, and TP3: 17750 / 18000 in extension. Bearish Scenario in case of breaking the buying zone: Sell below 17500 with TP1: 17469; TP2: 17421, and TP3: 17358 in extension.
Primary Scenario: Sales below 16767 / 16838 (wait for a return to these levels) with targets at 16615.70 and 16513.72 as an extension. Alternative Scenario: Buys above 16730 with targets at 16766 and 16838 as an extension.
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