GBP/USD Daily Forecast – Pound Regains 1.25 Handle on a Weaker Dollar

The British pound rallied against the greenback in North American trading on Thursday after rhetoric from a Fed member was perceived more dovish than expected.
Jignesh Davda

GBP/USD Bought From Lows Once Again

Similar to last week, GBP/USD dipped to notable lows this week but has caught a strong bid in the second half of the week to erase a bulk of the earlier losses.

On a weekly chart, 1.2523 has supported the pair on a candle close basis. Currently, the pair trades close to it and a weekly close above it would lead to a reversal pattern.

The pair managed to scale above resistance yesterday after a speech from New York Fed President Williams suggested the Fed may ease aggressively at their meeting later this month.

This has not been the first Fed member that has hinted that the central bank should consider a larger rate hike at the meeting ahead rather than two individual 25 basis point cuts over by the end of the year.

Fed member Evans is the other FOMC participant that seems to be thinking along the same lines. He recently argued that making a larger cut now could help move inflation higher over a shorter period of time.

Technical Analysis

Yesterday’s recovery shows strength considering the large daily candle print. I also think there were some notable technical breaks.

First, the pair has rallied above a three-week declining trendline. The pair was last seen retesting this trendline. As well, the pair has regained the 1.2500 handle which is considered to be quite significant considering its psychological properties.

GBPUSD 4-Hour Chart

As already mentioned, the weekly candle is in focus. Today’s price action will tend to be important. I think if the pair is able to close near current levels, it might cause some panic among bears that sold earlier in the week.

Having said that, the British pound has consistently been weak in July, when compared to its major counterparts. In this context, it might be too soon to call a significant bottom in place.

Bottom Line

  • GBP/USD is retesting a broken trendline that originates from a high posted in late June.
  • The weekly candle is in focus and suggests reversal potential.
  • The pair will need to hold above 1.2500 to maintain the bullish momentum.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.