VOT Research Desk
The United States Dollar (USD) has continued to fall, and the risk-on market environment has helped GBP/USD extend its winning streak of four weeks.
The US Federal Reserve’s (Fed) and the Bank of England’s (BoE) differing monetary policies have considerably narrowed, giving the bulls of the pound sterling more energy.
The focus now shifts to the relatively light week that lies ahead, which includes a collection of American statistics.
After US Federal Reserve Chairman Jerome Powell’s address in the second half of the week, the US Dollar sell-off gained momentum.
By indicating a rate increase of 50 basis points (bps) for next month, Powell sent a strong message. He added that it makes sense to ease the tightening tempo and that slowing down now will help.
Markets have approximately 80% confidence that this month’s rate increase will be 50 basis points.
GBP/USD Technical Analysis
The near-term technical picture for GBP/USD indicates a bullish bias as the pair keeps trading inside of the ascending regression channel and holds firmly above the 200-Daily MA.
Furthermore, the daily chart’s Relative Strength Index (RSI) indicator remains above 60, indicating that the most recent dip was a technical correction rather than a direction change.
On the upside, 1.2300 (psychological level, static level), 1.2400 (psychological level), and 1.2500 (psychological level) align as the first static resistance (psychological level, static level from June).
Key support level is formed at 1.2150 (200-Daily MA, middle of ascending regression channel).
Additional losses could occur toward 1.2000 (psychological level, lower-limit of the ascending regression channel) and 1.1900 (psychological level, static level) if GBP/USD breaks through that level and begins to use it as resistance.
