GBP/USD analysis: corrective advance may continue
|GBP/USD Current Price: 1.2571
- Broad dollar’s weakness led GBP/USD to weekly highs.
- UK Chancellor Phillip Hammond warned about a no-deal scenario.
- Brexit and weak UK data limiting Pound’s bullish potential in the long term.
The Sterling has extended its advance against the dollar Friday, to close in the 1.2570 price zone at weekly highs. The advance was directly linked to broad dollar’s weakness, helped by the absence of fresh UK data that could remind speculative interest the fragile situation of the kingdom’s economy. Also, a potential victory of Boris Johnson as leader of the Conservative Party, fuels chances of a hard-Brexit. During the weekend, chancellor Phillip Hammond, in a televised interview, warned that the UK government has a limited influence on how a no-deal Brexit scenario may result, something quite obvious yet somehow ignored by politicians that keep promising a better deal. At the beginning of the week, the UK will release the Rightmove House Price Index for June, hardly a market mover. Attention shifts to Tuesday, with the release of the latest employment data.
GBP/USD short-term technical outlook
The GBP/USD pair’s recovery seems corrective in the daily chart, as the price remains below all of its moving averages, with the 20 SMA flat at around 1.2610 and the 100 and 20 SMA heading lower some 300 pips above the current level. Technical indicators recovered from oversold levels but remain below their midlines, suggesting that the latest advance is corrective, moreover considering that the pair is coming from yearly lows. The 4 hours chart shows that the 20 SMA gained upward strength below the current level, while technical indicators lost their upward strength but held well into positive ground, somehow suggesting that the upward correction may continue during the upcoming sessions. The pair is just below the 50% retracement of its latest daily slide at 1.2590 and seems likely bulls will insist if the level is surpassed.
Support levels: 1.2500 1.2475 1.2430
Resistance levels: 1.2590 1.2630 1.2665
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