Forex Trading: GBP/USD Pullback Aiming for 1.3000 Support Zone

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The GBP/USD currency pair is trending downwards again as the greenback continues to strengthen against the Pound Sterling. The pair has been on a downward movement since last week when the 2019 rally ended.

The Pound is under immense pressure after Brexit-related headlines failed to trigger any optimism earlier on while the greenback benefited from a strong jobs data that reassured investors on the strength of the U.S. economy.

Analysts had feared that the jobs data for January would disappoint, which coupled with a build up to what many have termed as a promising alternative to the Brexit deal, triggered the upsurge in the GBP/USD currency pair during the first 2-3 weeks of January 2018.

Even early on Monday, the cable had shown some signs of a potential resumption to that rally before the Pound Sterling finally eased down to the power of the greenback for the pair to drop to the 1.3045 level.

GBP/USD Technical Analysis (60 min chart)

The GBP/USD currency pair is currently on a bearish channel which dates back to January 20, 2019. Based on the current momentum it looks like the current trend could take the pair well around the 1.3000 support zone, which also happens to be a psychological support level.

GBPUSD February 4, 2019

And while much room appears down below, there is also an opportunity upwards, which sets the pair for an interesting short-term trading period.

With that in mind, the bears will be more optimistic this week and possibly through next week as they target opportunities at S1 (1.3016), and S2 (1.2950) as demonstrated in the 60 min chart above. Based on the current exchange rate of about 1.3045, S2 represents a potential intermediate profit of up to 100 pips for the bears while S1 is a short-term trading target.

On the other hand, the bulls will be hoping that the current optimism expressed towards the greenback, or pessimism towards the Pound Sterling is a misconception of how events are actually likely to unfold in the foreseeable future. As such, they will be looking to pounce for opportunities by targeting R1 (1.3100) and R2 (1.3115), or even a little higher at 1.3200 should the pair make a full recovery to January highs.

GBP/USD Technical Analysis (Daily Chart)

For long-term trading opportunities, the daily chart offers more clarity going well into February 2019 and beyond. The current multi-year support level of 1.2000 (S2) does not seem to be in any danger of being breached. However, S1 at around the 1.2500 level is a realistic target for long-term traders.

With the Brexit deal still up in the air and with UK MPs evaluating alternative options, it is hard to tell where everything will land. As such, this uncertainty is likely to add more pressure to the GBP while the USD stands to benefit from a steady US economy. The 1.2500 level offers the bears an opportunity to make up to 500 pips on the long-term and many will be looking to capitalize.

GBPUSD Daily Chart February 4, 2019

However, should an unexpected resurgence of the pair happen, especially if the UK can find a quick and favorable resolution to the Brexit stalemate, then the pair could still edge higher towards the 1.3220 level at (R1) while R2, which is around the 1.3500 level is a long-term target that could generate up to 500 pips worth of bullish profits.

GBP/USD Fundamental Analysis

The US Jobs surprised strongly on Monday with 304,000 new jobs created in the first month of 2019. On the other hand, the UK Prime Minister Theresa May had said on Sunday she would seek a “pragmatic solution” to a parliamentary Brexit deadlock as she tries to reopen talks with Brussels.

But because of the current pending solutions to some teething problems regarding the Irish border backstop, this did not necessarily go well with the market judging by GBP/USD movement later on Monday evening. Clearly, there is no specific date for PM Theresa May to reopen talks with Brussels.

The UK economic fundamentals also failed to impress after the UK PMI manufacturing index came out short of expectations at 52.8 for January 2019. Manufacturers like Nissan are among those affected by the Brexit uncertainty. In addition, UK’s construction PMI for january is also expected to decelerate to 52.6 due to the Brexit stalemate.

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