- GBP/USD has reached its highest level since early May on Monday.
- The unabated dollar selloff fuels the pair's rally at the start of the week.
- BOE Governor Bailey is scheduled to deliver a speech late in the day.
GBP/USD has managed to build on last week's impressive gains and reached its highest level in more than two weeks above 1.2580. The pair faces the next resistance at 1.2600 and the bullish pressure could pick up in case this level turns into support.
The positive shift witnessed in risk sentiment at the start of the week is not allowing the greenback to find demand providing a boost to GBP/USD. The US Dollar Index, which lost more than 1% last week, is already down 0.75% on the day, reflecting the broad-based dollar weakness.
US President Joe Biden reiterated earlier in the day that they were considering reducing tariffs on China and noted that a recession in the US was "not inevitable." On top of these comments, investors continue to move away from safe-haven assets amid heightened optimism about China easing coronavirus-related restrictions. As of writing, US stock index futures were up between 0.8% and 1%, suggesting that GBP/USD is likely to preserve its bullish momentum in the second half of the day.
In the meantime, UK Foreign Secretary Liz Truss doesn't budge on their intentions to rewrite the Northern Ireland Protocol despite the Biden administration's warning that it could endanger a potential free trade deal with the US. Nevertheless, the dollar's market valuation should remain the primary driver of the pair's action at least in the near term.
In the second half of the day, the Chicago Fed National Activity Index for April will be featured in the US economic docket. Unless this data causes the market mood to sour, the greenback should stay on the back foot.
GBP/USD Technical Analysis
GBP/USD is closing in on the key 1.2600 level, where the Fibonacci 50% retracement of the downtrend that started on April 21 is located. The Relative Strength Index (RSI) indicator on the four-hour chart is sitting slightly above 70, suggesting that the pair could make a technical correction if it fails to break above that resistance at the first attempt.
In case 1.2600 is confirmed as support, the next bullish targets could be seen at 1.2650 (200-period SMA) and 1.2700 (psychological level, Fibonacci 61.8% retracement).
On the downside, 1.2550 (static level) aligns as interim support ahead of 1.2500 (psychological level, Fibonacci 38.2% retracement). A daily close below the latter could be seen as a significant bearish development and force buyers to book their profits and move to the sidelines.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.