- GBP / USD rose for the third consecutive session and fell closer to the night’s highs.
- The emergence of some new selling around the US dollar was seen as a key factor providing some support.
- The setup remains in favor of bullish traders and supports the prospects for additional short-term gains.
The pair GBP/USD It gained some positive traction for the third straight session on Tuesday and was last seen hovering just below the two-and-a-half-month highs, around 1.4150.
The intraday rally was sponsored by the emergence of some new selling around the US dollar, which languished near the lowest level since February 25 amid dovish Fed expectations. Even a modest rebound in bond yields The US Treasury and the prevailing climate of risk aversion did not provide any support to the dollar as a safe haven.
On the other hand, a sharp drop in COVID-19 deaths and new cases, coupled with the gradual reopening of the UK economy, continued to act as a tailwind for the British pound. Aside from this, the risk of reversal of an impending Scottish referendum on UK independence extended some additional support to the GBP / USD pair.
From a technical perspective, the overnight rally validated a bullish breakout through strong horizontal resistance near the key psychological level of 1.4000. A subsequent strength beyond 1.4100 supports prospects for an extension of the recent appreciation movement seen over the last month or so.
Meanwhile, the RSI (14) on the daily chart has moved on the verge of entering the overbought territory. This, in turn, prevented bull traders from placing new bets and could limit the rise of the GBP / USD pair. Investors also preferred to wait on the sidelines before a speech scheduled by Bank of England Governor Andrew Bailey.
However, the GBP / USD pair still appears poised to head back to regain the 1.4200 mark and rise further towards challenging the yearly highs around the 1.4235 area. Some subsequent buying should pave the way for a further short-term appreciation move towards the 1.4300 level en route to the 2018 yearly highs around the 1.4375 region.
On the other hand, 1.4100 could now protect the immediate drop. Any subsequent decline could be seen as an opportunity to initiate new bullish positions near the 1.4045-40 region. This, in turn, should help limit the decline near the strong breaking point of 1.4000 resistance, now turned into support.
Daily chart
Technical levels
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