GBPUSD is in a major bear market, but is currently experiencing a counter-trend correction. While it did decline to 1.3270 around the last Asian session, it has bounced back and solidified above 1.3300. Bottom line Analysts are not bullish on GBPUSD from a technical standpoint. They would view this as, while the bounce is nice, there’s no real base of bullish momentum formed just more. Investors are particularly focused on the United States’ next batch of macroeconomic data releases. These reports have the potential to move the currency pair significantly in either direction.
The drivers of the recent GBPUSD moves show a complicated clash of market forces at work. Looking at the daily time frame GBPUSD has completed its navy blue wave 1 drop. Now, it has started the navy blue wave 2 correction. This wave 2 correction period usually backtracks between 38% and 61% of the prior wave 1 decline. Therefore, the writing was on the wall for a short term stabilization at best—not a real end of the trend trending in the other direction.
Current Market Dynamics
Meanwhile, in foreign exchange, GBPUSD appears to have entered a corrective phase. It is really up against the wall with overlapping costs and poor momentum. The duo’s recent establishment above the 1.3300 figure is impressive, especially in light of its prior decline to below-figure 1.3270. Traders, or investors, should be careful not to get too euphoric, as the bigger GBPUSD bearish trend is still unfolding.
We think the climate for a GBPUSD pullback is now well established. That very powerful bearish 1st wave down is what has defined the corrective phase we are in now. Analysts are quick to point out that doesn’t mean the end of the bearish trend. Rather, it shows a temporary halt in the larger downward trend.
The pessimistic mood around GBPUSD is supercharged due to macroeconomic uncertainty. Investors are anticipating a few pieces of critical economic data out of the US that might offer further clarity on market direction. These data releases could be the decisive factor between GBPUSD rising or falling in the near term.
Technical Analysis Overview
The technical analysis of GBPUSD suggests a near-term respite from the general negative trend. So, the navy blue wave 1 decline is done. Presently, we’re in the long wave 2 correction that’s shown in navy blue on the chart above. This correction phase is very important for determining where the currency pair is likely to go in the future.
As stands GBPUSD deep in a corrective phase. Historically, during this time, it has made the price action do the tango with each other, creating a jittery and indecisive market sentiment. Short term traders will want to focus on important levels of support and resistance that could develop in the interim.
Note that the larger gray wave 1 downtrend shown is still in force. This does signify opportunities of short-term trading during this correction. Sentiment is overall bearish in outlook. Market participants should proceed with caution and stay tuned to all macroeconomic developments that may affect GBPUSD.