Fundamental Analysis of GBP/USD for December 18, 2018

GBP/USD is currently trading sideways with higher volatility at the edge of 1.2600 area from where the price is expected to push lower in the coming days. The pair is very sensitive to the BREXIT deal developments and the FED's Rate Hike decision this week. In this context, certain volatility is expected in this pair where USD is likely to dominate GBP further in the coming days.

Recently UK Prime Minister Theresa May is looking forward for 30 more days to save the BREXIT deal as she thinks it is the only way to avoid chaotic split from the European Union. May's talks with the EU is expected to continue in January. The deadline for the actual leave from the EU is March 2019. So, a certain decision is going to be taken before that will lead to a long-term decisive momentum for GBP in future. Recently UK Rightmove HPI report was published with a slight increase to -1.5% from the previous value of -1.7% which helped the currency to gain certain momentum but how much time it can sustain it is still uncertain. Tomorrow CPI report is going to be published which is expected to decrease to 2.3% from the previous value of 2.4%, PPI Input is expected to decrease to -2.8% from the previous value of 0.8%, RPI is expected to slightly decrease to 3.2% from the previous value of 3.3%, and Core CPI is expected to decrease as well to 1.8% from the previous value of 1.9%.

On the other hand, this week US Federal Funds Rate report is going to be published which is expected to increase to 2.50% from the previous value of 2.25%. The FED is still determined to raise the official funds rate this week that is priced in by the markets. On the other hand, President Trump is against too fast pace of monetary tightenening as he thinks it could trigger recession in the coming years. The FED recently declared that a cyclle of rate hikes can be suspended in 2019, but it will fulfill its target. Today US Building Permits report is going to be published with increase to 1.27M from the previous figure of 1.26M and Housing Starts is expected to be unchanged at 1.23M.

Meantime, GBP is expected to struggle further against USD amid weak expectations for the upcoming economic reports. USD has a better chance for gaining strength because of the rate hike this week.

Now let us look at the technical view. The price is currently residing inside the strong bearish daily candle formed on Friday as well as at the edge of 1.2600 area. The price is still quite indecisive but being below 1.2700 area along with the dynamic level of 20 EMA as resistance, it is expected to push the price lower towards 1.2500 support area in the coming days. As the price remains below 1.30 area with a daily close, the bearish bias is expected to continue.

SUPPORT: 1.2500, 1.2600

RESISTANCE: 1.2700, 1.2800-50

BIAS: BEARISH

MOMENTUM: NON-VOLATILE but CORRECTIVE

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The material has been provided by InstaForex Company - www.instaforex.com