GBP/USD Forecast: Bulls temporarily side-lined but retaining control

GBP/USD Current price: 1.3928

• UK finance minister Rishi Sunak is likely to announce additional help for business.
• Markit to confirm that manufacturing output in the UK expanded in January at a solid pace.
• GBP/USD corrected extreme overbought conditions, further slides unclear.

The GBP/USD pair fell for a second consecutive day, closing the week in the red at 1.3928. A scarce UK macroeconomic calendar favored the slump, as there were no reasons to buy the pound. The market has already priced in better progress in coronavirus immunization in the UK, which could be translated into a sooner economic comeback. Profit-taking on the last trading day of the month may have also taken its toll after the pair reached an almost three-year high mid-week.

Over the weekend, news pointed out that UK finance minister Rishi Sunak would announce this week 5 billion pounds of additional grants to help businesses hit by the pandemic in his budget statement next Wednesday. Markit will release the final reading of the UK Manufacturing PMI this Monday, foreseen at 54.9. The country will publish January money data, with Mortgage Approvals expected at 96K.

GBP/USD short-term technical outlook

From a technical point of view, the GBP/USD pair is in a corrective decline. In the daily chart, the pair develops above bullish moving averages. The 20 SMA provides dynamic support at 1.3860, with a break below it opening the doors for a steeper decline. Technical indicators retreated sharply from overbought readings, maintaining their bearish slopes but within positive levels. In the 4-hour chart, the pair is developing below a bearish 20 SMA and just above a bullish 100 SMA. Technical indicators remain near oversold levels, the Momentum bouncing modestly, but the RSI maintaining its bearish slope.

Support levels: 1.3880 1.3830 1.3775

Resistance levels: 1.3965 1.4000 1.4040

View Live Chart for the GBP/USD