Cable (GBP/USD) looks like it’s on its way to a support zone that hasn’t been broken since November last year!
Will the pattern hold in the next few days?
Or will current market themes extend the pair’s downswing and force a downside breakout?
GBP/USD 4-hour Forex Chart by TradingView
March has NOT been a good month for GBP/USD, which fell victim to the divergence between the Fed and the Bank of England’s (BOE) monetary policy biases.
If you recall, Fed members have been supporting a more “prudent” approach to easing monetary policies even as they retained their three interest rate cut forecasts this year. On the other hand, two BOE members who voted for a rate hike recently switched to the “hold” camp and surprised a lot of GBP bulls.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the British pound and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
How low can GBP/USD go before GBP bulls show up again?
A quick look at the forex calendar tells us that the markets are expecting slight improvements in today’s U.K. mortgage approvals and individual lending. The final S&P Global manufacturing PMI is also expected to be confirmed at 49.9, which is sooooo close to the 50.0 expansionary mark.
Better-than-expected results from the U.K. or an improvement in overall risk sentiment could inspire pullbacks in USD’s gains and possibly some strength for GBP/USD.
The pair, which is also testing the S2 (1.2540) Pivot Point support, could see a few bullish candlesticks and start an upswing towards areas of interest like 1.2600 or 1.2620.
But if yesterday’s pro-USD and slightly anti-risk sentiment extends to the next couple of days, then GBP/USD may extend its downswing and up the odds of a downside breakout.
In case of sustained trading below the 1.2525 range support GBP/USD may head to previous inflection points like 1.2450 and 1.2400.