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The British pound currency has a big week ahead against the US dollar on the foreign exchange market, at a time when the pair at risk of slipping into a much-lower trading range, following numerous failed attempts at the 1.4000 handle.
Sterling faces a number of key risk events on both side of the pond this week. Starting with the UK, the release of jobs, wage, manufacturing and inflation data could either propel the pound higher or plunge the British currency across the board.
Bank of England Governor Andrew Bailey is also scheduled to speak later today, alongside the Deputy BoE Governor Cunliffe. Markets will be looking for any comments about the recent UK data point releases from the central bankers, and their thoughts on the general state of the UK economy.
Looking across the Atlantic, FED Chair Powell will also be testifying on Capitol Hill this week. Traders also look to a slew of high-impacting data points from the USA economy later this week, with inflation and manufacturing data the main highlights.
As you can see, sterling could face a volatile trading week, just from the sheer scale of data point being released and central bank speeches. Sentiment towards sterling and the greenback could turn on a dime this week, so caution is advised trading sterling.
On the technical front the GBPUSD pair has started to weaken below its 200-period moving average on the four-hour time frame, which effectively means that the short-term trend is starting to turn bearish.
A number of other important technical indicators, such the Parabolic SAR and Williams Alligator are flashing sell signal in the short-term. Furthermore, a bearish triple-top pattern is also in play. Bulls need to move sterling back above the 1.4000 level to negate short-term selling pressure.
According to the ActivTrader Market Sentiment tool some 71 percent of traders are bullish towards the GBUSD pair. Traders remain on the wrong side of the market at the moment. It is worth noting that such a one-way sentiment skew probably means more short-term losses for this pair.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame a bearish triple-top pattern is engulfing the GBPUSD pair at the moment. As long as the price holds below the 1.4000 level then the near-term prospects for sterling look bleak.
A bearish head and shoulders pattern is also in play and is pointing towards a possible drop towards the 1.3500 support zone.
Traders should note that the bearish breakout will take place if the price moves below the 1.3780 level this week. It is also worth saying that the short-term trend in the GBPUSD pair is bearish below the 1.3900 level.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame the GBPUSD pair is trapped inside a broadening ascending wedge pattern, between the 1.4300 and 1.3550 level. It is possible the GBPUSD pair is working its way down towards the bottom of the wedge.
The GBPUSD pair could fall towards its key 200-day moving average, around 1.3200 if a bearish breakout under the wedge occurs.
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Bulls should be aware that the RSI, Parabolic SAR, Williams Alligator, and MACD are all issuing sell signals at the moment.
