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GBP/USD Daily Forecast – Sterling Reverses Lower From Major Resistance

Volatility was heightened in the global markets at the European open as investors fled from risky assets in favor of safe-haven assets like gold and bonds. The currency markets appear to be little impacted by the shift to risk aversion as the major currencies trade within typical price ranges.

The S&P 500 is down about two and a half percent shortly after the European open while the UK FTSE has shed about three percent. Most media outlets are attributing the decline in equity markets today to an escalation in fears over the Coronavirus.

The week ahead is a quiet one in terms of economic data pertaining to GBP/USD. The highlight will be US consumer confidence figures on Tuesday and then US GDP and durable goods orders on Thursday. Several members of the Bank of England are scheduled to speak throughout the week.

There were three major economic releases from the UK last week and all came in ahead of analyst expectations. Nevertheless, Sterling posted a weekly loss against the dollar. The lack of buying last week could be signaling more losses to come for the British pound.

Technical Analysis

GBP/USD has been trading around a major level at 1.2961. This level served as a notable barrier in the fourth quarter and then acted as support earlier this year. The pair reversed lower after briefly scaling above it on Friday and the momentum is once again to the downside.

GBPUSD Daily Chart
GBPUSD Daily Chart

The exchange rate is on pace to post a bearish engulfing candle on a daily chart which also builds towards a bearish case over the near-term. On a monthly chart, the pair is also set to print a reversal candle.

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For the session ahead, resistance is seen at 1.2924. Bulls will want to see a rally above it to lift the near-term bearish tone. On the downside, 1.2880 has held the pair higher twice in February on a daily close basis. Beyond that, further support is found at 1.2859.

Bottom Line

  • GBP/USD is seeing renewed bearish pressure in the early week. If the pair closes near current levels, or lower, it could be signaling a bearish continuation.

  • The global equity markets are seeing an abrupt shift to risk aversion as investors become increasingly concerned about the Coronavirus.

This article was originally posted on FX Empire

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