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27.01.2023 11:29 AM
Analysis of GBP/USD on January 27. GBP on roller coaster ride

Hi everyone! On the 1H chart, the GBP/USD pair declined to 1.2342 yesterday. Shortly after, it rebounded from it this level to 1.2432. However, the US dollar managed to regain ground. The pair was gradually dropping to 1.2342. If the price bounces off this level, it is likely to rise slightly. Should the pair close below it, the price could dip to 1.2238.

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The pound/dollar pair has been on a roller coaster ride for two weeks. It means that it is rather volatile but it is stuck in the same range. Traders ignored the US GDP and durable goods orders reports published yesterday For a few hours the US dollar had been growing. However, it resumed a downward movement a bit later. Thus, US macro stats failed to facilitate the US dollar's growth. The US will unveil new reports today – the PCE Price Index and the Consumer Sentiment Index. This data is of minor importance. Speculators may take notice of the Consumer Sentiment Index but their reaction will hardly be strong. If yesterday the pair added 50 pips after the release of macro stats, today its movement is likely to be weaker.

Traders have already focused on the meetings of the Bank of England and the Fed, which will be held next week. So, the pair will hardly break out of a narrow range until these events. In my opinion, the BoE meeting will be crucial as it is still unclear how aggressively the regulator may raise the interest rate. Traders are also anticipating the speech of BoE Governor Andrew Bailey. The further trajectory of the pound/dollar pair will depend on these events.

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On the 4-hour chart, the pair consolidated above 1.2250, the Fibonacci correction level of 127.2%. It indicates that the pair could resume a steady rise and touch 1.2441. In case of a rollback, the pair may drop to 1.2250, the Fibo level of 127.2%. If it settles above 1.2441, it is highly likely to appreciate to the Fibonacci correction level of 161.8%. There are no new divergences today.

Commitments of Traders (COT):

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Commitments of Traders (COT):

The mood of the Non-commercial traders over the past week has become less bearish than a week earlier. The number of long positions rose by 5,462, while the number of short ones increased by 703. The overall sentiment of large traders remains bearish. The number of short contracts still exceeds the number of long ones. Over the past few months, the satiation has become more favorable for the British currency. However, the difference between the number of long and short positions is almost twofold again. Thus, the prospects for the pound sterling have deteriorated again. Yet, it is growing steadily, possibly fueled by a rally of the euro. On the 4-hour chart, the pair broke through the three-month upward corridor. It may limit its upside potential.

Economic calendar for US and UK:

US – PCE Price Index, 13:30 UTC.

US – University of Michigan Consumer Sentiment Index, 15:00 UTC.

On Friday, the economic calendar includes only US data. The impact of fundamental factors on the market sentiment in the afternoon may be weak as there will be no important reports.

Outlook for GBP/USD and trading recommendations:

It is better to open short positions if the pair retreats from 1.2432 on the hourly chart with targets level of 1.2342 and 1.2238. It is recommended to open long positions if the pair consolidates above 1.2432 with the target level of 1.2590. It would be wise to buy the pair if it rebounds from 1.2342 with the target level of 1.2432.

Samir Klishi,
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