Just this week, the GBP/USD pair, often called ‘Cable’, were caught in massive volatility. It retreated from a new three-year high of 1.3445 that it scored on Monday. Despite this strength on the pair’s behalf, the pair had trouble following through after the release of U.S. labor market data. As the week progressed, GBP/USD remained in the lower half of its weekly range, raising concerns about its ability to sustain recent gains.
GBP/USD has a share of about 11% of all FX transactions. Similarly, it is the fourth most traded currency pair in the world, with an average of $630 billion traded per day as of 2022. Due to their somewhat archaic standing, movements in this pair can have huge effects for traders and investors’ interest together.
Market Reactions to U.S. Labor Data
This week’s record U.S. labor market data added to pressure on GBP/USD. This added to the currency pair’s difficulty in keeping upward momentum after hitting its three-year high. Additionally, influential economic indicators biased trader sentiment. Consequently, the Pound Sterling found selling pressure around the 1.3450 level against the Greenback.
Despite seeing positive moves initially as traders digested the news, the pair quickly flipped to a bearish outlook as it failed to hold on above key support. Looking back, we can see that when prices are sustained below the 21-day SMA, they tend to continue falling. This drop may aim for the 50-day SMA at 1.3007 and perhaps for the 200-day SMA at 1.2845.
“The US has recently sent messages to China through relevant parties, hoping to start talks with China. China is currently evaluating this.” – Chinese Commerce Ministry
Technical Analysis and Resistance Levels
GBP/USD would ideally like to see a close above the important psychological barrier of 1.3350. Doing so will make sure we don’t slip into the corrective bias that’s been prevalent this week. If acceptance exceeds this price point, it has the potential to ignite a new uptrend. Traders would then turn their attention to a possible advance to the February 2022 high at 1.3644.
If the duo is unable to remain above the 1.3350, it will be forced to face selling pressure. This would lead it to fall back down toward the aforementioned SMAs. The 14-day Relative Strength Index (RSI) is nearly 59 and has begun to tick upward past the midline. This bullish pattern would suggest a greater upside potential for GBP/USD should the buying momentum continue to gain steam.
Outlook for GBP/USD Moving Forward
Looking forward, traders will be watching closely to see how GBP/USD reacts to important economic releases and geopolitical risk. If the pair manages to break above its three-year high resistance of 1.3445, it will ignite bullish sentiment among traders. Investors can be heartened by this big shift.
daily RSI is holding above the midline, thus forming a potent dip-buying scenario. Speculators may view prevailing prices as attractive, creating a possibility for a price recovery. Keep a close eye on all GBP currency pairs. For instance, GBP/JPY, or the ‘Dragon,’ makes up 3% of all FX trades, and EUR/GBP adds another 2%.