GBP/USD Daily Forecast – Sterling on Pace to Post Third Straight Day of Gains

Weekly Resistance in Play Once Again for GBP/USD

The British pound has recovered higher after a sharp fall, however, notable resistance is within sight and where GBP/USD closes the week off will be important.

The exchange rate has benefited from a weaker dollar as the dollar index (DXY) has reversed lower after testing resistance from its 200 and 50-day moving averages. In the week thus far, the only major currency that has not gained against the greenback is the Japanese yen.

Despite the recovery, GBP/USD still trades heavy relative to the post-election decline. This drop saw the pair trading from just above 1.3500 to hitting a low near 1.2900 in the short span of about a week. The current recovery has served to erase about a quarter of the prior decline.

A weaker dollar stands to keep GBP/USD underpinned, however, a fundamental shift is likely required for the pair to make meaningful upward gains.

The markets will likely continue to see Sterling as a currency that has quite a bit of risk associated with it as a result of Brexit uncertainty. Unless the situation changes and a no-deal Brexit is no longer a threat, rallies in the pair might just be viewed as selling opportunities.

Technical Analysis

The 200-week moving average is once again in play for GBP/USD. This indicator was briefly breached following the election, although the bullish break was not sustained. Aside from the brief rise above the moving average earlier this month, the currency pair has not traded above it on a sustained basis in just over five years.

The moving average currently comes in at 1.3082 and the weekly close in relation to it will be important.

For the session ahead, resistance is seen at 1.3109. This is a level that has acted as both support and resistance in December. In the event of a decline, 1.3000 is seen as strong support.

Bottom Line

• GBP/USD is recovering on the back of a weaker dollar and is set to post a third straight day of gains.
• The 200-week moving average is in play and the weekly close relative to it will tend to set the tone for next week.