GBPUSD Has A Quiet Start to the Week as Markets Await Iran’s Next Move

GBPUSD extended its losses on Friday as risk aversion dominated market sentiment The currency pair peaked at 1.3159 during the Asian session and traded steadily lower. By the end of the New York session, GBPUSD was at 1.3072 which was 60 pips lower from its opening price.

Markets Jittery of Iran’s Next Move

As we reported last week, news that the US killed Iranian General Soleimani weighed on market sentiment. The general was a key military figure in the Middle East who was said to have approved protesters’ attacks in the US embassy in Baghdad. There were heavy speculations that Iran would retaliate over the weekend after the government warned that it would make the US responsible for his death. To the relief of investors, tensions did not escalate any more than threats. US President Donald Trump has warned that the US would target Iran’s sites of worship if they were to retaliate.

So far, it’s been a quiet Asian trading session for GBPUSD. The currency pair has been trading within a tight, 20-pip range since trading started. If you plan on trading it today, you will need to keep tabs on our website as we provide updates on the US-Iran tensions. This event will likely dictate market sentiment in the coming days or maybe even weeks.

Brexit Soon to be Official

Another key event for the pound is going to be when Article 50 is processed on January 31 and the UK will officially depart from the European Union (EU). News about the UK and EU not coming into terms on certain issues will also likely weigh on the pound. In the past, there have been talks about the EU pushing for its citizens’ working rights to be protected in the UK and to which UK Prime Minister Boris Johnson seems unreceptive. Consequently, this led to a slide in GBPUSD.

Read our Best Trading Ideas for 2020.

GBPUSD Outlook

On the hourly time frame, we see that GBPUSD is currently finding support at the 200 SMA. If you take a look at the big picture, however, it would seem that a head and shoulders chart pattern has materialized on the currency pair. This chart pattern is taken as a bearish indicator because the market’s higher highs were succeeded by a lower high. Technical analysis in forex trading tells us that this could be a sign that momentum has shifted into the sellers’ side.

Now, the neckline already looks to have been broken. However, it is typical for the market to re-test it for resistance. If there are enough buyers in today’s trading, we could see GBPUSD pullback to the neckline around 1.3145. This price also coincides with the 200 SMA and the 38.2% Fib level (when you draw from the high of December 31 to yesterday’s low). Reversal candles around this level could mean that GBPUSD may be headed to last week’s lows at 1.3050 or maybe even to support at 1.2975.

On the other hand, a strong bullish close above the neckline could mean that buyers are looking to push prices back to their 3-month highs at 1.3283.

Don’t miss a beat! Follow us on Telegram and Twitter.

More content