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The British pound currency went on a wild ride against the US dollar last week, as the pair rallied by nearly 150 points following the Bank of England policy meeting and the release of the January jobs report from the United States economy.
Traders were caught off-guard with the sudden pullback from the 1.3700 handle at the start of last week, as the much-telegraphed recovery in the US dollar index sapped the strength away from the GBPUSD Pair. However, the huge reversal for the lows of last week and subsequent recovery back above the 1.3700 handle speaks volumes about the current uptrend in the GBPUSD pair.
The weekly price chart looks exceptionally bullish while the pair continues to hold above the 1.3700 handle, and hints that the upside momentum in the pair is alive and well all the time bulls support sterling above 1.3700.
In terms of risk events this week the release of the United States CPI inflation report should be key in determining where sterling trades. I believe a softer CPI headline number will derail the US dollar index and propel sterling above the 1.3800 handle.
On the flip side, a strong US CPI number could cause another sudden pullback, placing the 1.3680 level squarely in focus. The 1.3610 level is the line-in-the sand for the GBPUSD pair this week, in terms of short-term sentiment.
Speaking of sentiment, the ActivTrader Market Sentiment tool shows that traders are becoming more bearish towards the GBPUSD. Traders have been on the wrong side of the market move since the recovery form the 1.2660 area.
Some 78 percent of traders are bearish towards sterling, meaning that sentiment has got even more bearish since last week, even though traders have been wrong sided since the recovery started.
Source by ActivTrader.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame the short-term technical appear extremely positive. Bulls have moved the price above the 1.3757 level, which means that sterling is making higher highs again.
If bulls can defend the 1.3700 level on any pullbacks then an eventual test of the 1.3850 to 1.3900 level should be expected in the short-term.
Weakness under the 1.3700 level could prompt a technical test of the 1.3670 or even the 1.3610 levels. However, dip-buying is likely to be a solid strategy while the price trades above the former weekly high.
Source by ActivTrader.
GBPUSD Medium-term Technical Analysis
The daily time frame continues to show a large, inverted head and shoulders pattern is in play. The fact that this area is being defended on pullbacks is extremely bullish.
Additionally, daily price closes above the 1.3750 handle should be closely watched as a sign of bullish intent. Watch out for the GBPUSD pair performing fresh weekly, monthly, and yearly high, as this will be a sign that bulls are preparing to take the GBPUSD pair towards the 1.400. handle.
The GBPUSD pair is incredibly technical, so shaking out and short squeeze could be expected, even if the 1.3700 handle is being defended on a daily basis. Buying dips under the 1.3700 handle still appears a solid strategy at this stage in preparation for 1.4000 or even 1.4150.
Source by ActivTrader.
