It was generally a very slow day all across the FX markets for most of the day yesterday and this saw the GBPUSD pair being caught in a nice tight range with a lot of consolidation happening. It was the first day of the week and hence the slowness in the markets was quite expected but the traders need to be wary about a breakout in either direction.
GBPUSD in Consolidation
The pound has been a bit lost for direction and momentum over the last week or so. The momentum has all been to the downside, so much that even a hawkish BOE was not enough to trigger an upmove and add strength to the bulls. The upmove did happen but it was quickly sold into, which has since led to a large reversal and the bears back in control of the pair. This is not something that the traders would have expected when the pound was enjoying a good run since the beginning of the year which saw it gain 800 pips on the back of a weak dollar.
Even now, the strength of the dollar is not total and as steady as the dollar bulls would have liked but the fact that the rise in the pound had happened when the volume was pretty much low, shows that the pound is currently standing on weak ground which is likely to become worse if the anticipation of the market for strong data from the US and rate hikes from the Fed turn out to be true in due course of time. This should set the cat among the pigeons and the pound is likely to be one of the hardest hit if and when this happens.
Looking ahead to the rest of the day, we have the inflation data from the UK and this is likely to breathe some life into this pair. With the BOE looking to hike rates, a strong inflation data might just be what the doctor ordered for the pound and this could then help the pound make a strong run towards the 1.40 region in due course of time.
This article was originally posted on FX Empire
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