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The British pound currency continues to trade around the 1.3500 level again as traders await a raft of United Kingdom data, and the events on the border of Ukraine to culminate on February 15th.
It must be said that the price action sterling is still appear quite bullish, despite the obvious risks from the Ukraine drama with Wednesday, February 16 widely being seen as the likely date for the Russian invasion of Ukraine despite no official confirmation from Russian.
However, the Russian Foreign Minister Sergey Lavrov has told President Putin that the US had put forward concrete proposals on reducing military risks and that he could see a way to move forward with talks.
Yesterday, Russia’s Foreign Minister Sergey Lavrov also said that EU and NATO responses have not been satisfactory, which underscores the risk-off mood and chances of a military conflict.
Aside from the Ukraine risk, sterling traders have to digest jobless, inflation, and retail sales data from the United Kingdom. We should therefore highly expect bouts of volatility for the GBPUSD pair.
The CPI reading is going to be the big one in terms of key economic releases, due to the fact that the Bank of England has embarked on back-to-back rate hikes over the last two policy meetings.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are currently bearish towards sterling.
With 60% of traders turning bearish, it should be noted that the shift since last week is quite large, where around 62% were bearish. For me, it is hard to gauge a definitive signal from the current sentiment reading.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, technical analysis clearly shows that that GBPUSD pair is struggling to make new higher highs, therefore increasing the chance of a decent price correction.
The MACD indicator shows bearish price divergence extending down towards the 1.3450 level. This could be a key area where GBPUSD bulls attempt to step in a take the pair back towards the 1.3550 area.
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GBPUSD Medium-term Technical Analysis
According to the daily time frame, the GBPUSD pair has formed a huge descending broadening wedge pattern yet to play out to the upside. The overall nature of these patterns is usually bullish.
The GBPUSD pair is also consolidating below a key trendline, as sterling struggles to make a new higher high above the current 2022 high. I think a further correction and another test back towards the trendline seems probable.
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