GBP/USD turned bullish in October last year after being bearish since summer 2021 and going through a crash in September, as the UK Gilt yields surged. The price climbed around 20 cents higher, but it formed a resistance around $1.2450s, which rejected the price twice, once late last year and once early this year.
This pair retreated lower but the 200 MA (purple) held as support on the daily chart twice, which was a sign that the uptrend would resume again. On the daily GBP/USD chart, the price reached this important level last Friday but was rejected once more. But, the bullish momentum picked up again this week as the USD retreated lower and yesterday we saw a break above that resistance level, with the price peaking at around 1.2520s.
Fundamentally, the US Dollar is suffering due to market trading on interest rate expectations, as the FED is expected to bring and end the hiking cycle at the next meeting and start cutting rates not too late after that. However, the USD tends to appreciate during a recession as a safe haven, and a weak ISM Manufacturing PMI report may have caused the recent upside push to be just a squeeze before the reversal. Although it’s still to early to call a recession, so risk assets are benefiting from the idea of lower FED rates, while the USD is retreating.
However, we may need to wait for more economic numbers to come out, such as the ISM Services PMI report later today to see how the market evolves. On top of that, there is a high expectation that the Bank of England will deliver a 12th rate hike inn a row in its May meeting. However, there are some speculations that the central bank may need to start cutting rates earlier than expected, but this has had no impact on the pound’s near-term performance so far.
So, fundamentals are looking bullish for this pair and the technical picture on the daily chart continue to support a fresh advance with a firm bullish tone after the latest bounce. The break and close above 1.2450s will likely generate an initial signal for further bullish continuation.
GBP/USD
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