GBP/USD Forecast: Improving Momentum, but Conviction Still Questionable

GBPUSD forecast

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The GBP/USD exchange rate is pushing higher at the start of the new week with the pair quoted at 1.2491 at the time of writing. Analyst and technical forecaster Richard Perry of Hantec Markets says a break of the $1.2530/$1.2540 region holds the key to further advances.

Cable managed to edge higher on Friday (on a very forgettable session due to the U.S. public holiday) but the market is looking to pull higher once more today.

The key test for the market to suggest direction is building, comes with the resistance at $1.2530/$1.2540.

There has been an improvement across momentum indicators in the past few sessions, but this is not yet a move of conviction.

Stochastics and RSI are rising, but the moves are a little tentative.

GBP/USD chart

The MACD lines need to bull cross too.

The trigger would be a closing break above $1.2540 which would suggest that the sterling bulls are in the driving seat within the medium term range once more.

This would then re-open the range resistance levels, with $1.2685 and $1.2810 then in focus.

However, this is still a very uncertain moment for the outlook, with these moves still being near term in duration.

The bulls will point to the hourly chart showing improved momentum configuration, and a basis of support around $1.2450.

This needs to solidify for a near term positive outlook to really take hold now.

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Markets: Safe Haven Dollar Underperforming

There is a distinctly risk positive bias that has started the new week. There does not seem to be any significant reason behind the move (so perhaps a degree of caution needs to be taken here), but Asian equity markets have been decisively bid overnight.

Chinese media have been pushing a “bull market” narrative over the weekend, and it is interesting to see the Shanghai Composite over +5% higher today.

This bullish theme has leaked into forex major which are taking a risk positive skew which is benefitting higher beta majors at the expense of the safer havens.

The Aussie and Kiwi are strong outperformers (this coming a day ahead of he Reserve Bank of Australia expected to talk up the economic rebound prospects for Australia). After Friday’s public holiday in the US, we see Treasury yields picking up too (along the risk positive theme).

However, it is important to note that many of these moves are still within ranging patterns and there would likely need to be something more substantial for a decisive breakout of recent consolidations that have taken hold across many major markets.

For this morning, traders appear to be looking past elevated levels of COVID-19 infections, but if the death numbers accelerate, this may not last long.