Odds are rising quickly that Cable is gonna see a ton of action very soon with monetary policy statements from both the Federal Reserve and Bank of England this week.
What is price action telling us and what areas of the chart should we watch before putting on risk?
GBP/USD 4-Hour Forex Chart by TradingView
What’s up forex fiends! If USD/JPY was THE currency pair to watch this week, then GBP/USD comes as a pretty darn close second with two major catalysts ahead: the latest monetary policy decisions from the Federal Reserve on Wednesday and the Bank of England on Thursday.
These are almost guaranteed market moving catalysts and if you haven’t done your homework on either event, then you’d better check out our FOMC Event Guide and BOE Event Guide to help figure out your biases and scenarios to watch before making your moves.
Now, if you have done your homework and think that GBP/USD is the asset with the best odds of getting ya some pips this week, then here are the technicals on the pair to consider when structuring your risk management strategy.
First, we can see the pair is in chop and consolidation mode on the four hour timeframe. We see momentums of wild volatility and momentum, but for most of October, the pair traded in the 1.2100 – 1.2200 range.
That makes those two levels the biggest ones to watch if you’re in the camp that thinks even if volatility spikes higher, the fundamental picture will likely keep the market contained and choppy in the new month ahead.
For the bears it’s the confluence of the falling 200 SMA, falling ‘highs’ trendline, and R1 Pivot resistance area that may draw in more technical buyers to limit the upside, while the bulls should be watching the 1.2050 – 1.2100 psychological levels to see if bullish patterns emerge before considering long plays.
Now, if you’re the camp that this week’s central bank events will spark and big directional move, those same areas are the ones for breakout patterns before considering risk managing an expectation of a trend to emerge.
If you’re a bull and an upside breakout does materialize, and considering the average true daily range of roughly 85 pips, then an momentum move could run up to the 1.2300 – 1.2350 area (just below the R2 pivot resistance area) before running out of steam.
If you’re a bear, a downside break may draw in enough sellers to push the market to the 1.2000 major psychological level, where there may be short-term support off of profit taking or general exhaustion since this pair has been in a strong downtrend since peaking around 1.3100 back in July.
Once again, the price outcome will all depend on how the fundamentals play out, but what you do think? Are you leaning bullish or bearish on GBP/USD this week or will the pair stay in a range and choppy? Let us know in the comment section below!
