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GBP/USD Forecast: Hits Potential Floor

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
  • In my daily analysis of major currency pairs, the GBP/USD pair has caught my attention as we fell yet again during the Monday session.
  • In fact, we slammed into the crucial 1.21 level, an area that was a major swing low previously, and therefore could be an area of interest.
  • After all, a certain amount of “market memory” should be found here, and so far, the reaction has been rather strong.

GBP/USD Forecast Today 14/01: Hits Potential Floor (graph)

Technical Analysis

The technical analysis for this GBP/USD pair is obviously horrible, but I think you’ve got a situation where you have to look at this through the prism of whether or not we are oversold at the moment. I think that’s probably the case, and therefore this bounce will make a certain amount of sense, however, I do not like the idea of “fishing for a bottom” here, despite the fact that most technical analyst would suggest this is a real possibility.

This is mainly due to the fact that the market is driven by questions about the British ability to get a reasonable budget past, and of course the whole idea that the Federal Reserve is light years away from doing anything remotely close to loosening monetary policy. After all, traders had initially thought that the Federal Reserve is going to cut multiple times in 2025, but the reality is that they will not be able to, and therefore I think you’ve got to look at this as a market that is pricing that in. However, we had gotten to far to the downside and I think it’s only a matter of time before we get a bit of a bounce. That bounce should end up being thought of as a “buying opportunity for US dollars.” The 1.2350 level is an area that I would love to start shorting from, but we will have to wait and see if we can even get that far to the upside.

The alternative is that we break down below the 1.21 level and then go looking to the 1.20 level after that. The 1.20 level is obviously a large, round, psychologically significant figure, and I do think it’s an area that we will eventually try to get to. That being said, over the last 4 sessions, we have dropped roughly 400 pips, and a bounce would make a certain amount of sense. Look for exhaustion to take advantage of.

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Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

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