GBPUSD consolidates around cycle highs as the momentum wanes

The USD has been
supported recently amid the ongoing de-escalation in trade wars. This has most likely to
do with positioning rather than fundamentals. In fact, the short dollar trade got
very overstretched, so positive news on the tariffs front could provide a pullback on some unwinding of those trades.
In the medium term, the US Dollar should keep on depreciating as the path of
least resistance for the Fed remains to cut rates, but in the short-term it could provide a decent pullback.

On the daily chart, we can see that GBPUSD reached the cycle highs before consolidating as the bullish momentum waned on more positive tariff news. From a risk management perspective, the buyers will have a better risk to reward setup around the 1.32 handle or better yet, at the major trendline. The sellers, on the other hand, will likely keep on piling in around these levels to position for a correction into the major trendline and a break below the 1.32 handle should see the momentum rising as the sellers will likely increase the bearish bets.

This article was written by Giuseppe Dellamotta at www.forexlive.com.