GBP to USD Forecast – British Pound Attempts a Major Breakout

GBP to USD Forecast Video for 05.04.23

British Pound vs US Dollar Technical Analysis

The British pound has rallied during the trading session on Tuesday to pierce the 1.25 level. The 1.25 level is an area of significant psychological importance, and we had been looking at this chart through the prism of meeting the resistance between the 1.24 level in the 1.25 level. The question now is whether or not we can continue to go higher, because if we do it would be a major breakout for a longer-term move from everything I can see on the charts.

However, if we turn around and give this up, it could be a sign that this is a barrier that simply cannot be broken. In that scenario, we would see the market drop to the 1.23 level more likely than not, and then perhaps down to the moving averages underneath. Speaking of moving averages, the 50-Day EMA has broken above the 200-Day EMA in the so-called “golden cross.” Ultimately, longer-term “buy-and-hold” traders are attracted to this type of setup.

Keep in mind that a lot of this comes down to the Federal Reserve and what traders think it will do, as there is a sizable amount of the population that thinks the Federal Reserve will have to cut rates rather soon, so they are trying to price in a weaker US dollar. That being said, the reason the Federal Reserve would have to cut would be due to recession. Over the longer term, the US dollar tends to perform fairly well in these recessions, because although interest rates will drop, the reality is that there is very little in the way of global growth to support other currencies.

Nonetheless, the most important thing you can do is pay attention to what the market is actually doing, not what it “should be doing.” I think as traders we all make this mistake from time to time. That being said, if we get a daily close well above the 1.25 level, you have to assume that the British pound will continue to go much higher, but we will have to wait and see.

For a look at all of today’s economic events, check out our economic calendar.