GBP/USD Daily Forecast – Sterling Attempting a Fourth Straight Day of Gains

Has GBP/USD Carved Out a Bottom?

The pound to dollar exchange rate has risen in the past three consecutive sessions and the pair looks like it is trying to make it a fourth. The dollar is under pressure which is underpinning the pair, however, it remains to be seen if a meaningful bottom is in place.

The post-election decline in Sterling was steep and has likely spooked bulls. Among several of the pound cross rates, the single-week dropped that followed the election served to erase gains from the prior three weeks.

Looking at a weekly chart for GBP/USD, the recovery in the past week measures to be only a fraction of the prior decline and this is something technical traders will likely be mindful of in the week ahead.

From a fundamental standpoint, the same threat of a no-deal Brexit that drove the pair down exists. This is something that would certainly need to change if Sterling were to resume upwards, in line with the broader trend seen since the start of September.

Technical Analysis

Over the near-term, GBP/USD is approaching resistance at 1.3145 which is a level that is well respected on a weekly chart. The pair has already climbed above a horizontal level at 1.3109 although the upward momentum has fizzled somewhat since approaching the level.

The larger time frames have moving average resistance to be mindful of. On a weekly chart, the 200 moving average is in play and served to hold the pair lower last week. Although GBP/USD is currently trading above it.

On a daily chart, the 20 moving average falls at 1.3097. Once again, the GBP/USD held below the indicator on Friday but is currently trading above it. How the pair closes today relative to the indicator will be important for a near-term directional bias.

Liquidity is likely to thin out with the upcoming holiday which could set up for some unusual price swings. This time of the year often accompanies unpredictable volatility.

Bottom Line

• The rally in GBP/USD has slowed a bit since late Friday, however, there have not been any signs of a pullback as of yet.
• The next level of resistance comes in at 1.3145.
• Most banks will be off on holiday on Wednesday, several will be on holiday starting tomorrow.