GBP/USD Forecast: Upside limited while below 1.3700

US dollar turns lower after the speech from Fed’s Powell and ahead of Biden.
Pound recovers strength and helps GBP/USD to new multi-year highs.
Cable unable to make a run above 1.3700.

Valeria Bednarik FXStreet

The GBP/USD jumped to 1.3709, reaching the highest intraday level since May 2018 and pulled back later. The move higher was boosted by a decline of the US dollar following Federal Reserve Powell's comments. He mentioned it is not time to talk about an exit strategy and warranted that the central bank will be very transparent when it starts to reduce QE. Market participants await US President-elect Biden stimulus package presentation. Wall Street was mixed, holding near record highs.

Economic data from the US came in weaker-than-expected with initial jobless claims rising unexpectedly to 965K, the highest since August. Market sentiment was unaffected. On Friday, economic data to be released includes trade and industrial production in the UK and retail sales and producer inflation in the US.

The pound recovered momentum on Thursday and also rose versus the euro. The UK's vaccination outlook is a positive development for the pound that could gain momentum if EUR/GBP breaks under 0.8860.

GBP/USD short-term technical outlook

The GBP/USD pair trades between 1.3650 and 1.3700. It is about to post the highest daily close in years, but it does not show yet strong signs of a break above 1.3700. On Thursday, the rebound gave the pound the needed momentum for a new test of the 1.3700/20 barrier. A consolidation above could trigger volatility and more gains. The positive tone will last while above 1.3610/20 (Dec 13 and 14 low). A slide below would target 1.3585 first, in a move that could extend to the 1.3545 support area.

Support levels: 1.3620 1.3545 1.3470

Resistance levels: 1.3710 1.3755 1.3755 1.3820

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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