Fundamental view:

The British pound gave up gains this week and suffered due to recent strength of the US dollar.  The US dollar gained strength due to many reasons like Federal Reserve decision and Worries about China also adds to the gloomy sentiment favoring the USD. Russia-Ukraine tensions exacerbated worries in turn favoring the safe haven US dollar. The US central bank is about to have a monetary policy meeting next week and will announce the monetary policy decision on January 26. Traders are expecting for clearer hints about upcoming rate hikes. Investors are pricing in a first rate hike for March 2022 and at least three hikes through the year.

On the other hand, uncertainty about the political future of Prime Minister Boris Johnson weighs on the pound. While Downing Street asks the public to wait for the results of an official inquiry, few Conservative MPs are reportedly plotting against the PM. Unflattering opinion polls provide back wind to these efforts. 

In this week, UK Core CPI monthly report on 19th January and US Initial Jobless Claims on 20th January created uptrend whereas UK Unemployment Rate on 18th January and US Building Permits on 19th January created downtrend for the pair.

The major economic events deciding the movement of the pair in the next week are UK Markit/CIPS Manufacturing PMI at Jan 24, US CB Consumer Confidence Index at Jan 25, Fed Interest Rate Decision, FOMC Press Conference at Jan 26, UK Nationwide HPI yearly report, US GDP quarterly report, US Core Durable Goods Orders monthly report, Initial Jobless Claims at Jan 27 and Michigan Consumer Sentiment at Jan 28.

GBP/USD Weekly outlook:

Technical View:

Last week’s high was 0.42 lower than the previous week. Maintaining high at 1.3689 and low at 1.3545 showed a movement of 144 pips.

In the upcoming week we expect GBP/USD to show a bearish trend. The currency pair is trading below the 100 Simple Moving Average and the MACD trades to the downside. Should 1.3502 proves to be unreliable support then the pair may fall further to 1.3451 and 1.3358 respectively whereas a solid breakout above 1.3646 will open a clear path upward to 1.3739 and then will further raise up to 1.3790. Chart formation of inverted cup and handle pattern in H4 chart favors prospects of a bearish trend. Bearish engulfing pattern formation escalates the expectation for a bearish trend.