GBPUSD sold off sharply last Friday but appears to be finding support at the bottom of its short-term range at the 1.2400 major psychological level. Stochastic is already indicating oversold conditions, which means that sellers are exhausted and that buyers are likely to take over price action.
In that case, the pair could make it all the way back up to the range resistance at the 1.2570 area. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. However, these moving averages are also oscillating to show that range-bound conditions could stay in play.
A break below support could push price down by around 170 pips or the same height as the chart formation. Similarly, a break higher could bring the pair up by 170 pips or so. The moving averages are also around the middle of the range, potentially acting as near-term areas of interest.
Over the weekend, headlines indicated that UK Prime Minister May could move to end the free movement of migrants in March, reminding market watchers that Brexit negotiations are likely to kick off around that time as well. May is also expected to announce that EU migrants who have moved to the UK before the cutoff date will have their rights protected as long as British citizens living in other parts of Europe are given the same.
In the US, anticipation for Trump’s tax plan is building up once more this week as the US President has a speech scheduled mid-week. If his announcement turns out positive for corporate America, the dollar could continue to advance against its peers since this could also be a point in favor of a March Fed rate hike.
Other event risks for the week include UK construction and services PMI, as well as the US preliminary GDP reading. FOMC policymakers Yellen, Fischer, Evans, and Powell have speeches lined up on Friday.