- GBP/USD is consolidating just above 1.3650, modestly lower for the day, ahead of a busy week of UK data.
- The pair is testing a key uptrend, a break below which could open the door for a move to 1.3600.
Amid the lack of release of level one data from the US or Fed members (who are in blackout ahead of the Jan 25-26 meeting) this week, the GBP/USD could well be further boosted on the sterling side this week. Indeed, the latest UK labor market report is out on Tuesday, followed by December consumer price inflation data on Wednesday, before December retail sales on Friday. The data will help shape expectations as to whether the BoE will hike again in February (money markets suggest this is very likely), and these expectations will also be directly shaped by Governor Andrew Bailey’s own comments on Wednesday. The BoE’s Catherine Mann, who has erred more on the dovish side in recent months, will also speak on Friday.
Ahead of a busy week of economic and UK central bank events, GBP/USD is consolidating just above 1.3650, slightly lower on the session. Trading conditions have been thin and tenuous thus far this Monday due to the close of US markets for Martin Luthar King Jr. Day. The recent pullback from last week’s highs at 1.3750, in which the pair GBP/USD failed to break above its 200 DMA, still not deep enough to warrant suggestions that the pair’s bull run from December lows is over. In fact, the pair is currently probing but has not yet broken below an uptrend linking the Jan 3, 6, 10 and 11 lows.
If this trend line holds, it bodes well for a potential rally back above 1.3650. But if the US dollar, which weakened widely last week as longs were trimmed, sees some recovery this week, triggered perhaps by the Fed adjusting bets or perhaps further losses in equities, the pound could well be headed lower. Short-term bears would initially look for a test of the 1.3600 level, a major area of ​​both support and resistance in recent months.
Additional technical levels
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