On the foreign exchange market, GBP/USD buyers grow increasingly confident, establishing solid support around the 1.3250 area. The currency pair is in a fight for critical resistance areas. Whether this means the Pound Sterling is in the beginning stages of a long-term upward climb is uncertain. Analysts agree that this recovery may very well continue into next week, depending on a number of economic fundamentals as well as technical indicators.
After a few rough GBP/USD trading sessions, bullish GBP/USD traders came roaring back over the past month. They sent the duo up to challenge resistance just below the 1.3500 level. The duo managed to reclaim the all-important 21-day Simple Moving Average (SMA) at 1.3424. Most traders consider this to be a very bullish signal. The buyers continue to demonstrate a remarkable amount of strength. That’s a sign of optimism among GBP traders, as they watch and wait for more such promises to be made.
The 1.3142 August low is the new line-in-the-sand for GBP bulls. A sustained move under this demand zone might lead to deeper losses, possibly testing the 200-day SMA at 1.3198. Should buyers maintain the pressure above the 1.3500 handle, they’ll be eyeing a retest of the rising trendline resistance near 1.3600. They can even turn their aim towards a 1.3681 July 4 high.
Technical Indicators Highlight Recovery Potential
On daily charts, GBP/USD looks well set for further recovery on the upside. The recent convergence of the 50-day SMA and the 100-day SMA is especially significant. More importantly, these indicators are some of the earliest signs that market trends are about to change. Futures traders often watch these moving averages like hawks, because they can signal where the upward price movement starts and stops.
Given recent price action, there’s a solid chance GBP/USD recovery will continue further next week. If acceptance goes back above the 1.3490 supply area, this may invite additional upside potential. Traders are now looking towards retesting previous highs, including the September 17 high of 1.3763. Market sentiment surrounding the Pound Sterling seems to overwhelmingly favor the bulls, fueled by a high level of TDS on its strength.
Analysts have cautioned that though sentiment is rosy, it’s externalities that are still the worry. The Pound Sterling is being squeezed by the continued US-China trade war. Such a scenario would now have profound implications for the Pound’s future performance against the US Dollar. Releases of high-frequency economic data, along with ongoing geopolitical developments will be determining factors for the gold market in defining future price direction.
Economic Context and Market Sentiment
The economic backdrop for GBP/USD remains complex. Like other major central banks, the Bank of England (BoE) is extremely focused on taming inflation. Specifically, they target inflation, as measured by the Consumer Price Index (CPI), at 2%. Recent labor market data has shown the mounting challenges. Recently retired BoE Governor Andrew Bailey has made it his mission to remind us that today’s employment is misleading.
“Today’s labor market data backs my view of a softening labor market.” – Bank of England (BoE) Governor Andrew Bailey
This announcement highlights fears over inflationary pressure and the economic stability of the UK. The BoE’s response to inflation will be instrumental in determining future monetary policy decisions and market sentiment towards the Pound Sterling.
As traders assess these developments, they will be closely monitoring any changes in economic indicators and policy announcements from the BoE. The interplay between domestic economic conditions and international trade dynamics will continue to influence GBP/USD movements in the weeks ahead.