GBP/USD outlook: Cable extends recovery on fresh risk appetite, but overall picture is negative

Slobodan Drvenica Windsor Brokers

GBP/USD

Cable rose to the highest in over two weeks in early Monday, lifted by improved risk sentiment on comments from US President Biden about possible reduction of tariffs on China.

Fresh strength signals an extension of last week’s 2.05% rise (the biggest weekly advance since July 2020), adding to initial reversal signal, generated by weekly bullish engulfing pattern.

Improving daily techs (ascending 14-d momentum broke into positive territory and double bull-crosses of 5/10 and 5/20DMA’s underpin the action) while fresh strength broke through important Fibo barrier at 1.2512 (38.2% of 1.3090/1.2155) and eye pivotal level at 1.2622 (50% retracement / daily Kijun-sen), close above which would add to positive signals.

On the other side, fundamentals remain negative, as high inflation slows the growth, with growing threats that the economy is sliding into recession, darkening the outlook.

Near-term bias is expected to remain positive while the price action holds above 20DMA (1.2423), but failure to clear 1.2622 barrier would increase risk of recovery stall, as larger picture remains firmly bearish (weekly & monthly chart).

Res: 1.2622; 1.2637; 1.2697; 1.2733.
Sup: 1.2512; 1.2469; 1.2423; 1.2368.

Interested in GBP/USD technicals? Check out the key levels

1. R3 1.2574
2. R2 1.2537
3. R1 1.2511
PP 1.2475
1. S1 1.2449
2. S2 1.2412
3. S3 1.2387

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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