The US dollar gave up some points against its “riskier” counterparts such as the British pound following the release of US data.
Will momentum help extend the months-long uptrend in GBP/USD?
Let’s take a closer look at the 4-hour chart:
GBP/USD currency pair on 4-hour chart Chart by TradingView
In case you missed it, the decline in weekly US initial jobless claims released yesterday helped calm investors who were screaming “recession!” in the streets.
The suggestion that we may be seeing an economic “slowdown” rather than a “recession” has helped lift risk-linked currencies such as the British pound against the US dollar.
Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on the USD and GBP, it’s time to take a look at the economic calendar and stay up to date with the daily fundamental news.
The GBP/USD pair, which was consolidating near the psychological level of 1.2700, witnessed an upward breakout that took it to its current levels of 1.2750.
Are we at the beginning of a trend extension?
More bullish candles could push GBP/USD towards the 1.2800 pivot point levels or the 1.2850 middle channel resistance area.
If the rally is supported by fundamental catalysts, we could even see the GBP/USD pair retest previous areas of interest such as the R1 pivot point level (1.2890) or the major 1.3000 psychological handle.
On the other hand, a bearish shift could keep GBP/USD near multi-week lows. Look for bearish candles that could take GBP back to the 1.2700 support level.
If the GBP/USD pair declines to a sustained trade below the 1.2700 level, the GBP/USD pair could witness a bearish breakout that could drag the pair to the S2 pivot point line (1.2617) and the potential turning point.