January 18, 2021 / AtoZ Markets - GBPUSD started the new week bearish with over 60 pips from the opening price. The move adds to Friday losses as the dollar sparked back to life following a risk-off week. The cable particularly found the 1.37 unbreachable thus making the critical level even more important to watch. The price is currently touching last week's opening price at roughly 1.3515 with more opening to the downside for the bears to feast on. There are quite a number of large impact events coming later this week. Holidays in the US on Monday to observe Martin Luther King's day could lower volatility, especially during the New York session.
Meanwhile looking ahead in the week, the US Presidential inauguration might steal the spotlight. Later in the week, the Bank of England Governor will speak at different events. Biden's speech on Wednesday could give clear clues on the dollar in the medium-term. Market will decipher clues if he speaks more on the fiscal policy, possible lockdown and his tax policies. The dollar is currently on a bullish run with the stock market pressured.
Covid-19 cases in the UK have reportedly dropped following the lockdown enforced earlier in the month. Last week, the UK PM also said over 4 million doses of vaccine have been administered. It's expected that the virus situation in the country will continue to drop thus lifting the cable to a certain level. Perhaps, that could force another retest of the highly critical 1.37
18 January GBPUSD Elliott wave analysis
In our long term technical overview as updated in the last update, the cable ended a long term diagonal pattern at 1.1386. This has propelled a surge since March as the dollar plunged. However, the wave pattern developing is slow and gradual especially since December. We could be having a leading diagonal pattern evolving as the 18 January GBPUSD Elliott wave analysis chart below shows.
As the chart above shows, since the price broke above, it's be entrapped between 1.3515 and 1.37. To the downside, the Cable bull could be supported at the 1.345-1.343 support zone. If the support zone is breached, it could open ground to a more sharp decline to 1.32. This would be less likely if the dollar is capped and the risk-on is back after Wednesday. Thus, to the upside, a fresh retest of 1.37 is very much likely. However, the technical price patterns on the charts suggest Sterling would be subject to more pressure below 1.38 even if it escapes 1.37 eventually.