The British pound rose to its strongest level versus the greenback since beginning of March with yesterday’s rally taking the GBP/USD pair above the suggested target of 1.5170 (Daily Technical Analysis and Forecasts on 23rd April). This level is very significant as it includes the 23.6% Fibonacci level as well as the descending trend line which started back in June 2014. The move was largely driven by U.S. dollar weakness as demand for the greenback was limited. The dollar traded lower against almost all of its G10 peers during yesterday’s session and early Tuesday. All eyes will now shift to tomorrow’s Q1 UK GDP report as well as to Wednesday’s US monetary policy decision which could determine the medium and long term outlook for the pair.
From a technical point of view, the pound has been holding an upward trend against the dollar since mid-April. The GBP/USD pair has added more than 600 pips to its value following the strong rebound from the strong support level of 1.4570. The pound booked a second-consecutive week of inclines following the break above the 1.5170 level.
Bearing the above in mind, I remain bullish on GBP/USD, however, considering that a sharp volatility is expected within the upcoming short period, I will adjust my levels from a higher timeframe. Therefore, I will await for the price to test the 1.5330 level (probably triggering some more stops) before getting out of the market.
From thereon, I would expect the buyers to push hard, and if they manage to win the battle then they could send the price aggressively higher towards the psychological level of 1.5400. On the other hand, if we see the pair turning lower, which I do not foresee at the moment, support should be found around 1.5170, a previous resistance and a 23.6% Fibonacci retracement level. Going forward, if the 1.5330 level is broken, it would suggest that the pair is looking a lot more bullish (for further correction), prompting a more aggressive move towards the 1.5475 level.
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