Earlier this week, the GBP/USD exchange rate fell to its lowest point in more than 35 years. Still, it successfully held above the key 1.3500 figure. After an impressive move to 39-month highs of 1.3593, the pound is in an upside consolidation phase. Traders and analysts alike have been closely watching recently released economic data out of the U.S. and U.K. That would be good enough news to create a continued wave of positive movement in the markets.
Market participants will be eagerly awaiting the next U.S. Consumer Price Index (CPI) inflation numbers. In addition to the latest UK GDP data, they’re monitoring, either event could have the most dramatic effects on currency trends. For the bearish rally of GBP/USD to sustain, it needs to make repeated closes above 1.3600. If it does, we may very well see it rally toward the February 2022 high of 1.3643 and perhaps even the round number of 1.3700.
Current Market Position
GBP/USD has been remarkably resilient in its ability to hold above key support levels. The historical context Their recent episode falls into the pattern they established with two days of rejection over 1.3550 earlier this week. There was strong, underlying support that helped them survive. The next serious support level comes in at the May 13 low of 1.3270. This level lines up with the 50-day Simple Moving Average (SMA) and is key to holding bullish momentum.
If the pair can continue holding above the falling trendline support at 1.3503, it could be setting up for a bullish breakout. The Relative Strength Index (RSI) also currently sits above the midline at about 63, suggesting that bullish momentum is still firmly in place.
Economic Factors Influencing GBP/USD
As traders wait for the next big move in GBP/USD, all eyes are on key economic indicators. The release of the U.S. Nonfarm Payrolls data for May on Friday is coming up fast. This data is poised to move the currency pair in a big way. Just last week analysts were expecting a print of 7.1 million U.S. job openings. On the last business day of April, actual job openings jumped to 7.39 million – a momentous breakout that has the potential to positively shift market sentiment.
Of course, geopolitical factors may be in control besides employment data when it comes to affecting GBP/USD movements. U.S. President Donald Trump just raised import tariffs on steel and aluminum to 50%. He stated that this move aims to “even further secure the steel industry in the United States.” These advancing restrictions foster a hostile, unpredictable environment in international markets and may contribute to volatility in currency valuations.
Technical Indicators and Future Outlook
Indeed, the technical outlook for GBP/USD continues to be bullish, even with recent volatility. And the recent bullish crossover between the 100-day and 200-day SMAs further bolsters the argument that the long-term upward trend is here to stay. If GBP/USD can break above the important resistance area of 1.3600 it would pave the way for a greater upside. Sustaining this high level is essential for maintaining upward momentum.
Traders are wary of any major headwinds. Nonetheless, the bullish sentiment in the overall market should continue to dominate as long as these key support levels provide a floor. GBP/USD needs to overcome key hurdles to make a run, analysts warn. If it does, that would potentially target the January 2022 peak at 1.3749 and expose bearish bets to a more serious test.