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GBPUSD Technical Analysis – We are approaching a key resistance

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Basic Overview

The US dollar fell broadly after weak US jobless claims and the Institute for Supply Management’s services PMI. Overall, the data did little to change interest rate expectations, but it reinforced the view that the Federal Reserve will cut rates at least twice by the end of the year.

On the other hand, the pound was pressured by the strength of the US dollar last week which was more influenced by end-of-quarter flows than anything fundamental. This week, the US dollar has returned to a defensive stance as the market continues to trade the soft landing narrative.

Moreover, we saw the British elections yesterday and as widely expected, the Labour Party won a landslide victory. This result was already expected and did not affect the pound much.

GBP/USD Technical Analysis – Daily Time Frame

GBPUSD Daily

On the daily chart, we can see that the GBP/USD pair eventually bounced off the support level at 1.2635 and continued to rise following the weak US data on Wednesday. The price is now approaching the key resistance level at 1.28.

Here we can expect sellers to step in with a defined risk above the level to set the stage for a drop back to the support level of 1.2634. On the other hand, buyers will want to see the price rise higher to increase bullish bets to the 1.29 level after that.

GBP/USD Technical Analysis – 4-hour time frame

GBPUSD 4 hours

On the 4-hour chart, we can see that we recently saw a pullback to the 1.2740 level as buyers rushed to extend the rally to the 1.28 resistance level. Today, a lot will depend on the US non-farm payrolls report.

If we get bad data, the market could turn risk averse and we are likely to see sellers aggressively buying on every dip. Buyers will want to see a good or benign report that could lead to a buying opportunity on a dip to 1.2740.

GBPUSD Technical Analysis – 1-Hour Time Frame

GBPUSD 1 hour

On the 1-hour chart, we can see that the price is now trading in the middle of the two major levels, so from a risk management perspective, there is not much to do here. The red lines mark the average daily range for the day.

Upcoming incentives

Today we wrap up the week with the US Non-Farm Payrolls report, where the data is expected to show 190,000 jobs added in June, and the unemployment rate remaining unchanged at 4.0%.

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