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GBP/USD Technical Analysis: General Trend Break Underway


In conjunction with the recent strong gains of the US dollar, the sterling pound tried to be less reactive, taking advantage of the gains of the global financial markets and the relatively positive sentiments of investors.

  • The selling operations that the currency pair was exposed to last week pushed it towards the support level 1.2391.
  • For two trading sessions, the bears failed to break through this support, and by the end of this week’s trading, the currency pair jumped towards the resistance level 1.2485.
  • It closed trading around the level of 1.2446, and its destination turned downward.
  • According to the performance on the daily chart below, there is a break in the clear general direction.

The pound pared back losses against the dollar as investors tabbed their positions ahead of the weekend amid brightening global investor sentiment. Meanwhile, the US dollar seems poised to post a second consecutive weekly advance against the two European currencies, consistent with the broadly outperformance. Commenting on this, W. Brad Picktel, Forex Analyst at Jefferies LLC, says, “Friday’s reversal is where trades that worked most days of the week find themselves under pressure as market participants take profits and reduce risk over the weekend.”

Improved sentiment towards European currencies – the Euro and Sterling – helped the rally as regional stock markets were posting good weekly gains while US stocks pushed higher after growing signs that US leaders were on their way to a new financial settlement.

For his part, says Joe Manimbo, senior currency analyst at Western Union. “The rise of the US dollar to its highest levels in two months was subdued as cautious optimism about a deal to raise the US borrowing ceiling boosted risk sentiment. The dollar, on track for a second straight weekly rise, was hovering near three- and seven-week highs against the British pound and the euro, respectively, and remained within reach at six-month highs against the yen.”

Kevin McCarthy, the Republican Speaker of the House, said a bill to raise the US debt ceiling could be put to a vote as early as this week, offering hope that the White House and Congress will strike a deal to avoid default before the deadline in the first place from June. However, May proved to be a month of outperformance for the dollar, as investors reset expectations regarding the number of rate hikes due from the Federal Reserve.

On the other hand, flexible economic data in recent days witnessed strong bets on another increase in US interest rates in June, which prompted investors to buy the dollar.

According to the performance on the daily chart below, the general trend of the GBP/USD pair is still broken. The downward shift will be strengthened if the currency pair moves towards the support levels 1.2380 and 1.2250, respectively. On the other hand, the bulls will not control the direction without returning to the vicinity of the resistance levels 1.2550 and 1.2630, respectively.

The Sterling/Dollar pair will be affected this week by the announcement of PMI readings for the manufacturing and services sectors of the British economy, along with British inflation rates and statements on several occasions by the Governor of the Bank of England. On the side of the US dollar, interest will be in the announcement of the US economic growth rate, the preferred inflation reading of the Federal Reserve Bank, and the content of the minutes of the last meeting of the bank.

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