GBP/USD Forecast: Pound to edge higher on improving mood

GBP/USD has started to push higher, supported by improving market mood.
The pair is likely to face stiff resistance at 1.3160.
BOE's Tenreyro says rise in oil prices could dampen UK economic activity.

Eren Sengezer FXStreet

GBP/USD has gained traction after having spent the Asian trading hours in a relatively tight range near 1.3100. The positive shift witnessed in risk sentiment is helping the pair push higher in the early European session and buyers could continue to show interest in the British pound if it manages to rise above 1.3160.

Ahead of Thursday's meeting between Russian Foreign Minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba, reports suggesting that Ukraine was no longer insisting on NATO membership revived optimism for a de-escalation of the crisis.

The UK's FTSE Index is rising nearly 2% on Wednesday and S&P Futures are up more than 1%, mirroring a risk-positive market atmosphere.

In the meantime, the British government announced on Tuesday that it will phase out its imports of Russian oil and oil products by the end of 2022. Bank of England (BOE) Monetary Policy Committee Member Silvana Tenreyro said that rising oil prices could dampen economic activity. Tenreyro further added that they were not observing any obvious evidence of a wage-price spiral in the UK.

In case the UK's action on Russian oil imports weigh on growth, the BOE could switch its stance and refrain from tightening the policy. Such a development is likely to hurt the pound.

Nonetheless, risk perception remains the primary market driver for now and GBP/USD could extend its recovery, at least until headlines surrounding the Russia-Ukraine crisis force investors to start to seek refuge.

GBP/USD Technical Analysis

In case GBP/USD rises above 1.3160 (former support that reversed March 2021-December 2021 downtrend, 20-period SMA on the four-hour chart) and starts using that level as support, it could target 1.3200 (psychological level) and 1.3250 (static level).

On the downside, 1.3100 (psychological level) aligns as the first support before 1.3050 (static level) and 1.3000 (psychological level, static level).

Meanwhile, the Relative Strength Index (RSI) indicator on the four-hour chart is yet to rise above, suggesting that the current recovery is a technical correction.

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to Premium Sign In

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

EUR/USD extends its optimism past 1.1900

EUR/USD retains a firm underlying bid, surpassing the 1.1900 mark as the NA session draws to a close on Monday. The pair’s persistent uptrend comes as the US Dollar remains on the defensive, with traders staying cautious ahead of upcoming US NFP prints and CPI data.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold picks up pace, retargets $5,100

Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.

XRP struggles around $1.40 despite institutional inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.