GBP / USD technical analysis: bullish stability
Due to the rally in the US dollar against the rest of the other major currencies, the GBP / USD currency pair lost some of its gains, as it fell to 1.4111 support yesterday.
That’s ahead of the US employment results for the month of May. This is also after gains in optimism over the Bank of England’s futures tightened policy to the resistance level of 1.4250 the highest in three years before settling around 1.4150. The pound sterling remains well positioned against other major currencies amid new signals from the government that all Covid-19 restrictions will be lifted on June 21 as originally planned. Some analysts said that even if there was a delay in lifting the restrictions permanently, it would have less lasting consequences for the currency.
The pound fell in value earlier this month, which some analysts said could be the result of growing fears of a postponement of ‘Freedom Day’ to June 21, which weakened sentiment towards the British economy and currency. “Concerns about the spread of the Indian variable Covid and the risks facing plans to fully reopen for June 21 have once again weighed on the pound,” said Peter Karpata, currency analyst at ING Bank.
How the pound sterling trades in the future may depend on the strength of the economic recovery resulting from the opening. Therefore, with any disappointing news about the delay in unlocking, vaccines and data risk putting the UK currency in a weak position. Although concerns about the possible easing of restrictions have increased recently, the UK government maintains a cautiously optimistic tone, noting that vaccines keep people from being hospitalized, while analysts say it is unlikely that a delay derails the economic recovery anyway.
British Prime Minister Boris Johnson said midweek that “we have to wait a bit longer” to see the impact of the Indian variable. But at the same time, he added, “I can’t see anything in the data at the moment, which means we can’t go ahead with the fourth stage, opening on June 21. But we have to be very careful because there is no doubt that the ONS data on infection rates is showing an increase. “
On the economic front, the US ISM manufacturing PMI for May beat expectations at 60.7 with a reading of 61.2. ISM manufacturing prices paid stood at 88 against an estimate of 86.8 while the new orders index beat 66.3 with a 67. On the other hand, the manufacturing employment index fell. below 61.5 with a 50.9 while the Markit manufacturing PMI beat expectations 61.5 with a reading of 62.1.
From the technical analysis of the pair: In the short term and based on the performance on the hourly chart, it appears that the GBP / USD currency pair is trading within the formation of an ascending channel. The pair is now floating near the overbought levels of the 14 hour RSI. This indicates a short-term bullish slope in market sentiment. As a result, the bulls will aim for short term profits around 1.4199 or more at 1.4231. On the other hand, bears will look to jump on a potential pullback to around 1.4150 support or lower to 1.4116 support.
Over the long term and depending on the performance over the daily time horizon, it appears that the GBP / USD currency pair is trading within the formation of an ascending channel. The pair continues to trade near the 14-day RSI overbought levels. This shows a long term bullish bias in market sentiment. As a result, the bulls will look to jump on long term profits around the resistance of 1.4584 or more to the resistance of 1.5010. On the other hand, bears will target potential pullouts around the 1.3724 support or lower at the 1.3300 support level.
The British pound will be affected today by the UK services PMI announcement. The dollar will be impacted today by the announcement of the ADP reading of the evolution of the number of nonfarm jobs, weekly jobless claims in the United States, nonfarm productivity and the ISM index of managers purchasing services