GBP/USD Forecast: likely to remain suppressed on prospects of Scottish referendum, US GDP in focus

The greenback gained some additional ground on Thursday, with the US Dollar Index now eyeing to reclaim the key 100.00 psychological mark as investor turn their focus back to the strength of the US economy. The buck also benefited from optimistic remarks from two Fed officials - Chicago Fed President Charles Evans and Boston Fed President Eric Rosengren (non-voting member), supporting the case for gradual Fed rate-hikes in light of the incoming data pointing to solid fundamental of the US economy. Hence, the final revision of the US GDP numbers for the fourth quarter of 2016 would grab the spotlight later during early NA session. Apart from the growth numbers, speeches from speeches from couple of FOMC members - Dallas Fed President Robert Kaplan and San Francisco Fed President John Williams would also be looked upon for impetus during the NY trading session.

GBP/USD

The GBP/USD pair on Wednesday fell to as low as 1.2375 before bouncing back after the UK formally kicked-off the Brexit proceedings. The pair's weakness over the past couple of day could be attributed to renewed worries over possibilities of a hard Brexit. The pair, however, stalled the downslide as investors now await response from Donald Tusk, President of the European Council, which has the potential to trigger fresh bout of volatility across GBP crosses.

Adding to this, possibilities of yet another Scottish independence referendum also weighed on the British Pound. The Scottish Parliament, on Wednesday, approved a plan to request another independence referendum and granted first minister Nicola Sturgeon the authority to negotiate with Westminster on holding another vote.

Technically, the pair managed to bounce off from closer to 50% Fibonacci retracement level of 1.2109—1.2616 recent up-move and held 100-day SMA support on daily closing basis. The recovery move, however, as failed to gain further traction and the pair remained stuck within a narrow trading range below mid-1.2400s. Hence, it would be prudent to wait for a decisive move on either side before determining the pair’s near-term trajectory.

Momentum above mid-1.2400s is likely to confront immediate resistance near 1.2475 horizontal level, closely followed by 23.6% Fibonacci retracement level hurdle near 1.25 important psychological mark. A decisive break through the 1.25 handle, leading to a subsequent momentum above 1.2550-55 resistance now seems to pave way for continuation of the pair’s near-term appreciating move, even beyond 1.2600 round figure mark, towards its next major hurdle near 1.2685-90 region marking the very important 200-day SMA.

On the downside, 100-day SMA near 1.2420 region might continue to act as immediate support, below which the pair is likely to head back towards testing 50% Fibonacci retracement level support near 1.2370-75 region. On a convincing break below 1.2370-75 support, the pair is likely to accelerate the slide towards 61.8% Fibonacci retracement level support near the 1.2300 handle, en-route 1.2215-10 support area.