GBP/USD carving out a bull flag ahead of BOE Super Thursday

GBP/USD extends Tuesday’s bounce above 1.3900 amid weaker US dollar.
The cable carves out a bull flag formation on the daily sticks.
UK/ US PMIs eyed, BOE decision and US NFP could yield an upside break.

Dhwani Mehta FXStreet

GBP/USD is heading towards July highs at 1.3985, extending its bounce from near the 1.3875 region

The bulls remain in control above 1.3900 amid a broadly softer US dollar, divided between looming coronavirus worries, progress on US infrastructure bill and dovish Fed expectations.

On the GBP side of the equation, falling covid cases in the UK and its relative success in the vaccination campaigns underpin the pound.

Meanwhile, the GBP bulls also cheer the Brexit optimism, especially after the European Union (EU) has backed off a threat of imminent legal action against the UK over breaches of the Northern Ireland (NI) protocol of the Brexit agreement as the two sides try to work through their differences.

BOE in focus

The immediate focus is now on the US ADP and ISM Services PMI data while the UK Final Services PMI could also offer some trading incentives to the pair. However, the main event risks for the cable are the BOE ‘Super Thursday’ and Friday’s NFP report.

The UK central bank is likely to maintain its monetary policy settings while the focus will be on the economic forecasts, with rising concerns on inflation, which may prompt the BOE to hint at tapering sooner than expected. However, amidst ongoing certainty over the economic recovery, in light of the Delta covid variant flareups, the central bank could refrain from offering any hawkish signals.

GBP/USD technical outlook

With the recent rally that followed a brief consolidative mode, GBP/USD price has taken the shape of a bull flag.

The upcoming events are likely to determine whether the cable will yield the upside breakout from the bullish continuation formation or lead to a pattern failure.

GBP bulls need a firm break above the falling trendline resistance at 1.3958 for the bull flag validation.

Meanwhile, acceptance below the falling trendline support at 1.3857 will revive the bearish interests, with the corrective downside to resume towards the 21-Daily Moving Average (DMA) at 1.3826

The 14-day Relative Strength Index (RSI) is pointing north above the midline, supporting the potential move higher.

GBP/USD daily chart

GBP/USD additional levels to watch

GBP/USD

Overview
Today last price	1.3927
Today Daily Change	0.0012
Today Daily Change %	0.09
Today daily open	1.3915

Trends
Daily SMA20	1.3822
Daily SMA50	1.3937
Daily SMA100	1.3924
Daily SMA200	1.3744

Levels
Previous Daily High	1.3939
Previous Daily Low	1.3882
Previous Weekly High	1.3984
Previous Weekly Low	1.3737
Previous Monthly High	1.3984
Previous Monthly Low	1.3572
Daily Fibonacci 38.2%	1.3917
Daily Fibonacci 61.8%	1.3903
Daily Pivot Point S1	1.3885
Daily Pivot Point S2	1.3855
Daily Pivot Point S3	1.3828
Daily Pivot Point R1	1.3942
Daily Pivot Point R2	1.3969
Daily Pivot Point R3	1.3999

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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