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GBP/USD Forecast: Pound Sterling Sinks as US Dollar Recoils

GBP/USD Forecast: Pound Sterling Sinks as US Dollar Recoils

2020-02-26 20:58:00
Rich Dvorak, Analyst
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GBP/USD FORECAST: POUND STERLING PRESSURED AHEAD OF BREXIT TALKS, US DOLLAR SELLOFF STABILIZES

  • GBP/USD might target February lows near 1.2850 after spot prices quickly reversed lower off the 1.3000 handle
  • The Pound Sterling faces downward pressure with the restart of Brexit negotiations next week looming over GBP price action
  • The US Dollar has started to rebound broadly as coronavirus concerns look to trump a rise in Fed rate cut bets

GBP/USD has slid markedly so far during Wednesday’s trading session amid broad-based weakness in the Pound Sterling and strength in the US Dollar.

GBP/USD MIXED
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Change in Longs Shorts OI
Daily 0% -4% -2%
Weekly -2% 28% 11%
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Uncertainty that surrounds upcoming Brexit talks next week could explain the latest bit of downside in GBP price action. Meanwhile, coronavirus concerns linger and likely underscore sustained demand for safe-haven currencies like the USD.

GBP/USD PRICE CHART: DAILY TIME FRAME (SEPTEMBER 2019 TO FEBRUARY 2020)

GBP USD Price Chart GBPUSD Forecast

I noted in a Pound Sterling forecast published last week that spot GBP/USD prices were hovering around the 200-day exponential moving average, which showed potential to keep the cable bolstered.

GBP/USD initially bounced off this technical support zone, but the Pound Sterling has since slid lower against the US Dollar by about 100-pips after the major currency pair touched the 1.3000 handle.

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Technical resistance around the 1.3000 mark is plentiful. This area of confluence, highlighted by the 50-DMA and 38.2% Fibonacci retracement level of the October to December rally last year, has strong potential to keep GBP/USD price action bogged down.

GBP/USD PRICE CHART: 4-HOUR TIME FRAME (JANUARY 2020 TO FEBRUARY 2020)

GBP USD Price Chart GBPUSD Forecast

Shifting gears to a 4-hour GBP/USD chart brings to light three prominent swing lows printed this month between 1.2850-1.2900.

A drop below this region could open up the door for further downside in spot GBP/USD prices and encourage British Pound bears to target November lows near the 1.2800 handle.

On the other hand, a rebound off this level of technical confluence could send GBP/USD price action back toward the February 25 intraday swing high.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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