GBP/USD Forecast: Sterling in corrective mode after slump capped by a 55-period moving average
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- GBP/USD is correcting towards 1.3000 after 130 pips slump on Monday that saw the market selling all the way down to the target price of 1.2940.
- Sterling is still caught in a downward sloping trend with a 55-period moving average acting as a resistance at 1.3020.
- The Bank of England officials Andy Haldane and Governor Mark Carney are scheduled to speak later on Tuesday.
The GBP/USD is trading up 0.2% at around 1.2990 as the currency pair corrects heavy loses on Monday stemming from the news of the Northern Ireland’s Democratic Unionist Party (DUP) backing the proposal of the Conservative Party hardliners to make the EU's Northern Irish backstop illegal. The GBP/USD sold off all the way down to 1.2937, meeting the target price of 1.2940 earlier on Tuesday.
With the Bank of England chief economist Andy Haldane speaking in a seminar in Paris at 10:30 GMT and later the Bank of England Governor Mark Carney speaks about the artificial intelligence and the world economy in Canada at 15:20 GMT, the markets will await comments on Brexit and/or current development of the UK economy.
The GBP/USD extended its fall from last week’s high of 1.3237 after the Brexit summit turned out to be a failure in terms of pessimistic headlines made by the EU officials. In order to soften the stance, the UK Prime Minister Theresa May said that 95% of the Brexit deal is done already while the UK reportedly dropping the Irish border claims to avoid the failure on the Brexit agreement.
The junior coalition partner of ruling Conservative party, the Democratic Unionist Party came out backing the hardline Brexit stance saying it will vote to make Irish backstop illegal, putting the position of UK Prime Minister May into jeopardy.
The GBP/USD is trapped in a downward sloping trend framed by last week’s high of 1.3238 and Monday’s high of 1.3091. After falling sharply on Monday, the GBP/USD is currently in a corrective mode higher with the technical oscillators including Momentum, the Relative Strength Index both turning higher in the neutral territory on a 1-hour chart, while Slow Stochastics made a bullish swing higher in the oversold territory. As the GBP/USD reached the price target of 1.2940 earlier on Tuesday, the correction backed by profit-taking is in place and it is likely to bring GBP/USD to 1.3000. The correction on GBP/USD is seen capped by the psychologically important big figure and the 55-period moving average on a 1-hour chart.
GBP/USD 1-hour chart
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