GBP/USD was hitting session highs during American trading hours on Tuesday. This progress upward opens the door for even greater advancement. The release of the United States’ April inflation information was enough to trigger a flurry in currency trading. This data has proven to be the biggest mover of market activity. As noted above, during Wednesday’s European session, GBP/USD rocketed to a new weekly high above the 1.3350 level. This surge dramatically intensified its bullish momentum.
The latest low for GBP/USD came just shy of the 1.3140 area. This would indicate that we’re close to the completion of a corrective Wave (C) in its Elliott Wave form on the 1hr chart. Market analysts point out that this new technical formation makes a pretty strong argument for further upside in the currency pair.
Economic Factors Influencing GBP/USD
The inflation data released in the United States earlier this week has caused a major pivot in market sentiment. On top of that, it has radically shaped exchange rates. Savvy investors wildly pay attention to these economic indicators, because they can often influence decisions regarding monetary policy by central banks. Though largely forgotten, the impressive UK data forced traders to reconsider their short positioning, spurring a substantial wave of buying on GBP/USD.
The US inflation figures continue to set the tone for the market. At the same time, Bank of England Chief Economist Huw Pill has been dispensing lots of good advice that’s molding today’s environment. On Tuesday, Pill argued that inflationary pressures in the UK were broadening out, with potential implications for monetary policy going forward. His commentary almost perfectly timed the bullish shift in GBP/USD, demonstrating the connection between macroeconomic news and currency movements.
Market analysts believe that Pill’s comments underscore a still-urgent dilemma for the Bank of England. They’re trying to thread the needle between not stomping inflation’s head while the economy is barely out of the hospital. His warnings resonate with traders, who remain vigilant about potential shifts in interest rates and their subsequent effects on currency valuations.
Technical Analysis of GBP/USD
As far as technical analysis goes, GBP/USD has a very strong Elliott Wave structure that favors the pair’s current bullish trend. With the recent low just above 1.3140, I’m thinking that Wave (C) could be approaching its completion. This usually marks the start of a new longer-term upward wave. This bullish sentiment analysis works to prop traders up to find additional bullish momentum in the short-term.
With GBP/USD trading at a fresh weekly high, traders in search of clearer confirmation of sustained bullish momentum are plentiful. Technical patterns and external economic factors converge to craft the perfect storm environment for the currency pair. This creates a favorable environment for continued upward pressures.
Traders need to be aware of important resistance levels. These moments can hugely influence upcoming price action and breakouts. Given the current state of market conditions, it is not impossible for GBP/USD to go even higher if the positive data keeps rolling in.