GBP/USD forecast: remains overbought despite yesterday's sharp retreat

Haresh Menghani FXStreet

The GBP/USD pair steadily moved higher through the European session on Friday and recovered a major part of previous session's sharp retracement of over 250-pips from fresh post-Brexit highs. A goodish overnight US Dollar recovery, supported by the US President Donald Trump's pro-dollar comments, ran out of steam on Friday and triggered the initial leg of up-move from sub-1.4100 level.

The up-move got an additional boost after the prelim UK GDP growth estimates showed economic growth stood at 0.4% q-o-q during the fourth quarter of 2017. Meanwhile, the y-o-y growth rate bettered expectations and came in at 1.5% as compared to 1.4% anticipated. The up-move, however, stalled ahead of the 1.4300 handle as investors now look forward to the advance US GDP growth figures and durable goods orders data for fresh impetus.

Meanwhile, technical indicators on daily and weekly charts continue to suggest near-term overbought conditions. This coupled with Thursday's retracement from an intermediate hurdle near mid-1.4300s, which pointed to some initial signs of bullish exhaustion, adds to the credence that any further up-move is more likely to be short-lived and is unlikely to get extended far beyond the 1.4400 handle.

Hence, even a modest USD rebound, supported by slightly better-than-expected economic data, might prompt some aggressive long-unwinding trade on the last trading day of the week. Immediate support is now pegged near 1.4240 level and is followed by the 1.4200 round figure mark. Subsequent weakness below the mentioned support might now turn the pair vulnerable to slide towards 1.4135 intermediate support en-route the 1.4100 handle. The corrective slide could further get extended back towards the key 1.40 psychological mark.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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