GBP USD recovers and rebounds to major resistance

GBP/USD spent last week rising sharply in a rebound from its new 7-year low up to major resistance around the 1.4250 level. This rise occurred as the US dollar fell and worries about a potential UK exit of the European Union (Brexit) partially subsided.

To start the new week on Monday, the dollar initially rose, prompting a GBP/USD turn back down from that 1.4250 resistance. By Monday afternoon, however, the dollar retreated once again, pushing GBP/USD back up to resistance and marginally above it.

From a technical perspective, the currency pair continues as of this writing to trade under its 50-day moving average, despite this past week’s rebound, and remains entrenched within a strong bearish trend. Going forward, pressure on the pound should likely be maintained with the June Brexit referendum drawing closer on the medium-term horizon and a consistently dovish Bank of England disinclined to raise interest rates any time soon.

On the US dollar side of the currency pair, while the greenback persists in vacillating on constantly shifting expectations of another Federal Reserve rate hike, further monetary tightening this year in the US still remains a distinct possibility. This possibility generally continues to support the dollar against other major currencies that are driven by even more dovish central banks, including sterling and the Bank of England.

For these reasons, GBP/USD continues to face headwinds going forward, despite the current rebound. As long as the currency pair returns below the noted 1.4250 resistance level and remains trading under its 50-day moving average, the key downside target continues to be at the 1.4000 psychological support level. With any sustained re-break below that 1.4000 level, the next major downside target remains at the key 1.3500 support level, last hit in early 2009.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.