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In general, the continued decline by the pound sterling halted a rally dating back to the first days of March and the emergence of stability risks in the US banking sector, which since then led financial markets to bet on an almost imminent reversal of the US interest rate cycle.
- For four trading sessions in a row, the GBP/USD currency pair was exposed to profit-taking sales, which I often mentioned the possibility of occurring at any time.
- As a result, the currency pair bounced down to the level of 1.2344, and its recent gains affected the resistance level of 1.2525, its highest since June 2022.
- The currency pair stabilizes around 1.2385 at the time of writing the analysis, waiting for anything new.
By the end of a brief trading week, the GBP/USD has pulled back from a one-year high. The trend on the charts has shifted in favor of further gains and many analysts are tipping new highs for the coming months. The pound gave ground to a rally against the dollar last Thursday after surveys of key parts of the UK and US economies appeared to encourage an early pullback from some of the best levels of the pound-dollar rate since June last year.
The pound was also sold off against European and some Asia-Pacific currencies after the S&P Global Construction Purchasing Managers’ Index indicated that a dip in homebuilding activity was likely to take more wind from the sails of the UK’s third-largest economic sector in March.
Commenting on the future of the GBP/USD pair, George Davis, chief technical analyst at RBC Capital Markets, says that he is guiding the pound to reach 1.2667 during the next stage – to three months. “1.2599 serves as the next resistance target in this regard, followed by the May high at 1.2667,” Davis adds in the chart review.
In general, the continued decline by the pound sterling halted a rally dating back to the first days of March and the emergence of stability risks in the US banking sector, which since then led financial markets to bet on an almost imminent reversal of the US interest rate cycle.
US Federal Reserve officials still insist that interest rates are unlikely to be cut this year, but that did not stop the US dollar from selling broadly during March, spurring a rise in the pound in turn, which also led to encouragement from changing sentiment. More recently, ONS figures last week suggested that the British economy expanded slightly in the final quarter of last year while other data showed the economy appears to be doing better this year than professional forecasters had predicted.
According to the performance on the daily chart, and despite the recent move, the general trend of the GBP/USD pair still has a chance to rise, as the resistance is still 1.2400. There will be no actual reversal of the general trend without the bears moving in the currency pair below the 1.2270 support level, and on the other hand, the price will return above the 1.2525 resistance.
It paved the way for a strong bullish move, and at the same time moved the technical indicators toward overbought levels. I still prefer to sell the pound/dollar from every rising level. The currency pair will be affected today by statements by US Federal Reserve officials and the performance of global financial markets.
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