Could GBP/USD surge higher this week?
Fawad Razaqzada July 24, 2017 7:49 AM
The Eurozone flash PMIs released this morning were mostly weaker than expected. Yet there was little reaction in the EUR/USD, which actually started to come off the lows having started the day on back foot following its sharp gains last week. The EUR/USD broke to a new 52-week high last week after the ECB gave no indications that it was worried about the strength of the single currency and suggested that the future of the QE stimulus programme will be discussed in the September meeting. Despite the EUR/USD’s lack of response to the PMI data, some of the euro crosses such as EUR/GBP, EUR/JPY and EUR/AUD weakened. The EUR/GBP’s move lower supported the GBP/USD.
The GBP/USD may now play “catch up” and follow the footsteps of the EUR/USD from last week, for as long as (1) the EUR/GBP holds or ideally moves lower and (2) the dollar remains out of favour. The cable has now spent a considerable amount of time trading on both sides of the 1.30 handle. There was very little follow-through to the downside when it broke lower last week. This suggests to me that the market probably wants to push higher as the sellers apparently do not want to commit at these levels.
So as things stand, I am bullish and expect to see range expansion to the upside, perhaps similar to the EUR/USD price action last week. Indeed, with this almost being the last week of July, and with GBP/USD now above this month’s opening price of 1.3010 and last month’s closing price of 1.3022, it looks like we may already have seen the wick of the monthly candlestick form. Now it may be time to see range expansion and the body of monthly candle to form – similar to last month’s candle. However, if the cable ends this month below this 1.30 handle then this would invalidate the bullish idea. In the very short term, a break below last week’s low at 1.2930/35 would also be bearish.
In any case, there's plenty of key economic data coming up this week which could help accelerate the next move in the GBP/USD pair. Among others, we have UK GDP and the FOMC meeting on Wednesday, while GDP from the US will come in on Friday.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.