The pair has been suffering due to the strength in the dollar over the last few days and a continuation of that is likely to push the pair towards 1.40
The GBPUSD pair has also been moving lower over the last couple of days as the strength of the dollar seems to be the focus at this point of time. The dollar has been gaining in strength ever since comments from Trump, saying that he believed that the dollar should be strong as the economic data from the US was strong, led to a reversal of fortunes for the dollar.
The dollar has been on the backfoot since the middle of December and the pound has been one of the major gainers during this period, gaining more than 800 pips on the dollar. But over the last couple of days, we are seeing the first signs of exhaustion and weakness in the pair. The pair had risen not only due to the weakness of the dollar but also due to the strength in the pound which was buoyed by all the talk of a soft Brexit being planned for the UK at the end of the talks.
This has helped the pound to gain ground across the board and more so against the dollar which has been terribly weak during this period. But with the comments from Trump and with the growing anticipation of the new Fed Chief Powell taking over and with the expectation that some strong incoming data would help to strengthen the dollar and force the Fed to hike rates in March, the focus has clearly been on the dollar over the last few days and it is expected that this would continue in the short term as well.
Looking ahead to the rest of the day, we do not have any major data from the US or the UK, which is pretty much expected as it is the first day of the week. We are heading towards the end of the month and typically, we see a lot of month end flows and trade positioning ahead of the new month and this leads to a lot of volatility in the pound. We can expect more of the same over the next couple of days as we head towards the end of the month which should keep the pair under pressure but it is likely to find support in the 1.40 region.
Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.