1Finance

The GBP/USD opens up the new year in a weak position. 2015 begins with the interest rate differential in favor of the U.S. Dollar. This is 180 degrees from last December when investors were making powerful bets that the Bank of England would raise interest rates before the U.S. Federal Reserves.

The British Pound topped in July 2014 when it started to become clear to traders that the BoE didn’t have the all clear signal from the economy to begin hiking rates. Like many of the major economies, the U.K. is battling to keep inflation above its benchmark 2 percent level. This is the story that will concern investors throughout the new year.

Since the U.S. Fed appears to be on a path toward an interest rate hike sometime between April and June, the first quarter and perhaps the second quarter will have to be conceded to the U.S. Dollar. This means the GBP/USD will continue to trade sideways to lower at least during the first half of the year.



The year ended with the Forex pair trading on the bearish side of a major retracement zone at 1.5720 to 1.6001. This levels are key resistance in January.

December’s close at 1.5580 has created some interesting set ups for the month. The first thing traders should note is that the close is on the strong side of the angle that guided the market lower for 5 months. This angle is at 1.5270. Crossing to the bearish side of this angle will put the market in a weak position.

The nearest angle to watch is an uptrending angle at 1.5532. This angle held as support last month so buyers do recognize it. Holding this angle could lead to an early short-covering rally and a slight upside bias.

The tone of the market will be determined by trader reaction to 1.5532. Holding this angle could create enough upside momentum to trigger a short-covering rally into 1.5720.

A failure to hold 1.5532 will mean that sellers have a firm grip on the market and are likely to try to press it into at least 1.5270 in January.

the source