- GBP / USD gains positive traction on Thursday and recovers further from week-long lows.
- The breakout of the ascending channel appears to have turned the bias in favor of the bears.
- Continuation weakness below the 1.3700 level is needed to confirm the negative outlook.
GBP / USD has built on the previous day’s recovery move from near 1.3700, at one-week lows, and moved higher during the first half of trading action on Thursday. The momentum has pushed the pair to fresh daily highs, around the 1.3770-75 region, at the start of the European session.
The British pound was supported by the optimistic economic assessment of UK Finance Minister Rishi Sunak during the annual budget presentation on Wednesday. In addition to this, expectations of an imminent interest rate hike by the Bank of England have also acted as a tailwind for the British pound. This, coupled with a subdued action around the price of the US dollar, has provided a modest rise to the GBP / USD pair.
That said, a nice rally in US Treasury yields has helped limit USD losses and limited any significant gains for the GBP / USD pair. Investors also seem reluctant to open aggressive positions and prefer to wait for the outcome of the long-awaited ECB meeting. Aside from this, America’s third-quarter GDP advance report could generate some significant business opportunities.
Looking at the technical picture, the recent strong rally from near the 1.3400 level touched in September has stopped near a downtrend line that has been running since late July. The subsequent pullback dragged the GBP / USD pair below the bottom support of a month-old rising channel on Wednesday. This could have already set the stage for a new bearish move.
Meanwhile, the technical indicators on the daily chart, while losing positive momentum, have yet to confirm a bearish bias. This, coupled with the emergence of lower level buying, warrants some caution for bears. Therefore, it will be prudent to wait for some continuation selling below the 1.3700 level before positioning for an extension of the decline.
GBP / USD could accelerate downside momentum to test the next relevant support near 1.3650 before finally dropping below 1.3600 in the near term.
On the other hand, any subsequent positive movement is likely to meet resistance at the 1.3800 level and remain limited near the resistance of the downtrend line, around 1.3825-30. This is closely followed by the very important 200-day SMA, around 1.3850, which if decisively broken will negate any negative short-term bias and will be seen as a further trigger for the bulls.
Next, the GBP / USD pair could accelerate momentum towards the round 1.3900 level. Some continuation buying has the potential to push the pair towards the 1.3960-65 resistance, above which the bulls could aim to regain the key psychological level of 1.4000.
GBP / USD daily chart
GBP / USD technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
