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GBPUSD: Uptrend Isn't Sustainable and Could Turn Downward in the Coming Days

Inflation and RecessionCentral Bank Policy TrendsForex Market
Summary:

The GBPUSD failed to continue the strong rebound of the previous two trading days, falling to 1.2130 in the day, indicating the cautious attitude of the market before the speeches of Bank of England (BOE) Bailey and Federal Reserve Powell. Meanwhile, on a tepid risk keynote, the USD tried to rebound to limit the GBPUSD's continued upward movement.

Sell GBPUSD
End Time
CLOSED

1.21558

ENTRY PRICE

1.17600

TGT PRICE

1.24500

SL PRICE

1.23956 +0.00045 +0.03%

1648

Points

Loss

1.17600

TGT PRICE

1.23206

CLOSING

1.21558

ENTRY PRICE

1.24500

SL PRICE

Fundamentals

The GBPUSD fell slightly on Tuesday, ending a two-day rally. The GBPUSD remained on the defensive during the first half of the European session and is currently trading near the intraday low of 1.21300.
A series of factors helped the USD rebound modestly from Monday's seven-month low, which in turn put some downward pressure on the GBPUSD. Among them, a good rebound in U.S. Treasury Securities yields and a stronger risk keynote helped to revive demand for safe-haven USD.
In addition, the GBP is still closely related to the risk sentiment of global investors, which has not improved significantly. The recent drop in energy prices was also a positive factor, but this does not mean that the UK economy has experienced a shorter downturn than previously expected. Meanwhile, even if the market is still worried that the UK strike action and the rise in wage growth will continue to pose a downside risk to the economy and lead to a more sustained rise in UK inflation, the market has not digested the peak of pessimism over the GBP.
Because the BOE will not raise interest rates as much as the market expects, the GBP may fall in the future. But the GBP's performance still depends on risk sentiment. The weakening of the BOE's monetary policy will be detrimental to the GBP and pose a downside risk to the GBPUSD.
GBPUSD: Uptrend Isn't Sustainable and Could Turn Downward in the Coming Days_1

Technical Analysis

The GBPUSD returned above the medium-term upward trend line after falling below the 23.6% Fibonacci retracement from 1.2050 in the upward wave from 1.0325 to 1.2450.
At present, prices are losing some momentum, which is confirmed by technical indicators. The MACD is consolidated near the 0-axis, while the RSI is inclined downward in the neutral range of 50. A downward cross is about to be formed in the 4H timeframe.
Failure to stay above the uptrend could cause the price to fall to 1.2000 of the 200-day SMA, which has been a challenging level over the past two weeks. If it falls further, the 50-day SMA will be the next support, which moves around the Fibonacci level of 23.6% at 1.2050, and a sharper sell-off could follow if it closes below the integer threshold of 1.1900.
Alternatively, if it proves that 1.2240 can be easily broken through, the focus will shift to 1.2300 for further gains and the six-month high of 1.2450 will be tested again.
In the medium term, the GBPUSD is turning neutral after breaking the uptrend that started from the bottom of 1.0535. If it continues to rise, the outlook could turn positive. In the short term, the structures will all turn downward. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short
Entry price: 1.2150
Target price: 1.1760
Stop loss: 1.2450
Deadline: 2023-01-23 23:55:00
Support: 1.2100, 1.2072, 1.2044, 1.2012
Resistance: 1.2174, 1.2215, 1.2241, 1.2304
Risk Warnings and Investment Disclaimers
You understand and acknowledge that there is a high degree of risk involved in trading with strategies. Following any strategies or investment methodologies is the potential for loss. The content on the site is being provided by our contributors and analysts for information purposes only. You alone are solely responsible for determining whether any trading assets, or securities, or signal, or any other product is suitable for you based on your investment objectives and financial situation.

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Eva Chen

Analyst

Master of Economics, 8 years in the financial industry, CFA holder, joined HSBC (Hong Kong) Bank in 2013 after graduating from the University of California, USA in the Investment Research and Markets Department. With years of financial market experience and trading experience, having provided excellent investment advice to many brokerages, entity derivatives importers and clients in Greater China.

Rank

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480

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P/L Ratio

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Focus on

XAUUSD, WTI, USDCAD

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