Having a look at GU, its been an interesting week. Since the last article that was on GBPUSD and it reaching into resistance, the pair has fallen an incredible 400+ pips. Today we going to be looking at why that happened, and where we heading next on the Pound.
Analyzing GBP/USD fundamentally, we believe that there were 2 major fundamental catalysts that brought the Pound 400+ pips lower.
Starting with the Annual Budget we had the UK Chancellor Sunak state that we will see corporation tax increases in 2023, 1.6 billion will be spent on vaccines, a new policy regarding environmental sustainability will be brought forward as well as a freeze in income tax thresholds until April 2026.
These factors, although they appear negative in the short-term, have long-term positive effects. The pro-investing outlook shows that they are investing in the future. This is a much more effective process that stimulus checks in the U.S as they aren’t printing more Pounds which would result in the Pound being devalued.
November forecasts for the 2025 budget deficits was at 3.9% of the GDP, however, we have now seen it change to 2.8%. This shows that the BOE will be decreasing their debt and this is seen as a positive for the currency.
Furthermore, we have now seen a huge bid for the Dollar as we see the DXY crossing 91.50, making its way towards the 93.00 handle.
Taking a look at GBP/USD technically, we are looking for a push into the level of 1.37500 – 1.36000. This would be a favourable area for us to look to get into long positions as its retesting the weekly consolidation block, inline with our preferred Fibonacci level ( 78.6% ) and would line up beautifully with a touch of our 50 Day Moving Average.
Targets for this long position, should we see it play out, would be our weekly order block mentioned in the previous article in and around 1.44000.
We may see a slight over extension on GBP/USD with NFP numbers beating forecasts, but our bias remains long.
Don’t forget to subscribe to our blogs for weekly updates and more market insight.
Have a great weekend!