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GBP/USD Forecast 08/01/2014

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GBP/USD Chart 08 Jan 2014
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The pound sterling maintains its recent strength despite having been on a correction path

In today’s forecast we take a look at the recent correction in the British pound. The currency has had e tremendous 2013 and this year started with somewhat of a correction. We believe that current levels are good to wait and see if the pair drops below 1.6420 for a daily put trade for today and very likely tomorrow too.

With the GBP/USD shaking hands at 1.6443 as of writing we have already observed a test to the upside of recent ranges with the binary options forex pair spiking higher to just above 1.6455. Our scenario will be invalidated if we see it going above 1.6465 in which case we would be waiting for a better opportunity.

The data front has been rather quiet today form the UK, but the US session has started rather briskly with data from the private ADP employment survey that estimated that 238,000 jobs have been created in the last month of 2013. More important news from the US are on the line with the Federal Reserve’s meeting minutes scheduled for release at 19:00 GMT.

With the ADP data causing a spike lower to 1.6400 buyers emerged and have since taken it to test yesterday’s highs around 1.6438. Stops were vaulted and price has marked its daily high so far, but as we already said, this is not enough to discourage our sentiment to the downside.

The data front will bring us Trade Balance data from the UK tomorrow, which is unlikely to yield much surprises. Most of the US session until 19:00 GMT will likely remain more or less quiet so the minutes can be the risk event that starts a trade for us. Once again our call at this point in time is to buy daily puts if prices drop below 1.6420 for today and tomorrow.

The alternative scenario of an hourly close above 1.6465 will invalidate our strategy and we will wait for more price action before taking another go at this market.

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