1.4000 Coming Into View For The GBP/USD

Let’s dig into the GBP/USD technicals and see if we can find a trading opportunity for later in the week.

Shain Vernier•Tuesday, February 16, 2021•2 min read

GBP/USD to Experience High Volatility Till End of 2020: Reuters Poll

With only a few hours left in the Tuesday session, the Greenback is faring well vs the forex majors. A few of the key movers have been the EUR/USD (-0.12%), GBP/USD (+0.12%), USD/CAD (+0.38%), and USD/JPY (+0.49%). By a wide margin, the GBP/USD has been the biggest loser for the U.S. dollar. However, there are signs of optimism as traders reevaluate their short-term USD exposure.

This morning brought a relatively vacant economic calendar, but did feature a Fed official issuing public comments. Speaking to a real estate consortium, Kansas City Fed President Esther George addressed a few economic issues in her Tuesday talk. George took a cautionary tone toward the red-hot American real estate market. Home prices and purchases are at all-time highs ― George suggested that there is reason for concern. Here are the highlights:

“While the strains on real estate finance appear contained, this relative health has been importantly supported by the extraordinary policy response to the pandemic.”
“If support fades ahead of a sustained recovery, stresses could become more prominent.”
“A worrying scenario is that the economic impact of the pandemic outlasts the policy support programs currently in place. Should that occur, many renters and businesses could find themselves unable to meet their obligations.”

These are thought-provoking comments. Basically, George is saying that the high-flying real estate market is due to the Fed’s policy of unlimited QE. If rates rise or debt purchases cease, then things are due to change substantially. So, is the Fed getting ready to shift policy? No. But, George’s “if support fades ahead of a sustained recovery” comment alludes to rising inflation prematurely forcing the Fed’s hand ― a potential disaster for the U.S. real estate industry.

Let’s dig into the GBP/USD technicals and see if we can find a trading opportunity for later in the week.

GBP/USD Extends Yearly Gains

As you can see from the weekly chart below, the GBP/USD uptrend is intact. Prices are firmly on the bull and nearing the 1.4000 handle.

Bottom Line: For now, the key number on my radar for the GBP/USD is 1.4000. If we see a test of this area, a shorting opportunity may come into play. Until elected, I’ll have sell orders in the queue from 1.3994. With an initial stop loss at 1.4029, this trade produces 35 pips on a slightly better than 1:1 risk vs reward ratio.

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ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.