- DXY rebound loses steam.
- Brexit jitters negate upbeat UK fundamentals
- Dovish BOE Carney’s comments weigh.
Fresh bids emerged just ahead of the 1.41 handle, prompting a solid recovery in the GBP/USD pair, as the bulls look to regain the mid-1.41 barrier amid stalled rebound seen in the US dollar against its major peers.
The broad-based US dollar rebound ran out of legs over the last hour, as markets continue to weigh a weaker US Q4 GDP report, shrugging-off the rise in Treasury yields across the curve. The USD index failed above the 89 handle and eased to now trade +0.10% higher at 88.95.
On the GBP-side of the story, despite the recovery, it remains to be seen if the GBP bulls can sustain it, as the EU is due on Monday to approve criteria for negotiating a transition period that would bridge Brexit in March 2019 and the start of new trading terms. Meanwhile, comments from the BOE Governor Carney at Davos last Friday could also keep a check on the upside.
Looking ahead, “The week ahead will be a busy one and will once again be focused on the beleaguered US dollar. Dominating the schedule will be the first FOMC meeting of the year concluding on Wednesday, followed by the monthly US jobs report on Friday. Thursday brings both US and UK manufacturing PMI data, and Friday highlights not only the US jobs report (focusing on non-farm payrolls, the unemployment rate, and wage growth) but also the UK’s construction PMI data,” James Chen at Forex.com, wrote.
GBP/USD Technical Levels
According to Valeria Bednarik, Chief Analyst at FXStreet, “The pair has reached extreme overbought conditions in the daily chart a couple of weeks ago, and the latest retracement from the mentioned multi-year high has barely changed the course of technical indicators, which remain at extreme levels and with no signs of easing. In the same chart, the pair is far above all of its moving averages, with the 20 DMA some 400 pips below the current level.”
“In the 4 hours chart, the pair settled right below a bullish 20 SMA, the Momentum indicator entered negative territory with a strong downward slope, while the RSI consolidates around 54, all of which favors a downward corrective movement that should accelerate on a break below 1.4080, Thursday's low,” Valeria adds.
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