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Starting the new week of watchlist updates with a peek at GBP/USD. With surprise Brexit drama always lurking and U.S. housing data around the corner, will this simple setup on the one hour chart draw in Cable traders to make moves?

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Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar:

  • Japan Services producer prices at 12:50 am GMT (Aug. 27)
  • RBA’s Debelle speaks in Canberra at 3:00 am GMT (Aug. 27)
  • Japan core CPI at 6:00 am GMT (Aug. 27)
  • German GDP at 7:00 am GMT (Aug. 27)
  • U.S. home prices at 2:00 pm GMT (Aug. 27)

What to Watch: GBP/USD

GBP/USD 1-Hour Forex Chart
GBP/USD 1-Hour Forex Chart

Kicking off the final week of August with a look at GBP/USD. There’s not a lot on the forex calendar to keep the market moving, but as we saw last week, surprise Brexit development can appear out of no where to get Sterling moving. As for the Greenback, we do have housing data from the U.S. coming in tomorrow’s session, that won’t likely spark a big reaction, but given housing’s importance to the U.S. economy, it could keep the dollar moving on the session.

From a price action standpoint, GBP/USD has been in a longer-term downtrend this year thanks to the Brexit drama, and as pointed out in Forex Gump’s “Week Ahead” post earlier today. But in the past couple of weeks, GBP/USD has chopped higher, forming somewhat of a channel pattern higher on the one hour chart above. And at the moment, the pair is retesting the middle of the channel, which also happens to be broken minor resistance area that held last week.

If you’re a bull on Cable, this retest of broken resistance around the 1.2200 handle could draw in buyers, especially if we see positive Brexit rhetoric and/or a weak update on U.S. housing prices. Global risk sentiment is a big market driver as well, so any positive updates in the U.S.-China trade war would be a potential catalyst for GBP/USD support as well. If the bullish outlook holds, this pair looks interesting for a long play all the way down to the bottom of the rising channel, around the 1.2150 handle.

If you’re a bear on Cable, a combination of negative Brexit updates, positive U.S. housing data, and/or global risk aversion is likely to draw some sellers back into the pair and potentially return the market back into the longer-term downtrend. A break of the rising lows (around 1.2150) would be a strong signal to start planning out a short position, or if we see a retest and reversal patterns around the recent swing highs (around 1.2300), that would get you in the longer-term downtrend at a better price.