GBP/USD Daily Forecast – Sterling Regains 1.27 Handle

British Pound Makes a Comeback

Sterling was under pressure yesterday after quarterly GDP figures and manufacturing data fell short of expectation. The rally today, however, has served to erase yesterday’s losses.

The British pound is the strongest of the major currencies in the first half of European trading, with GBP/USD rising despite the dollar trading mostly flat on the day.

The currency pair has been stuck at some major upside resistance since last week but looks like it’s going to make another attempt at it.

A bulk of the day’s gains came following UK data that exceeded expectations. The Office for National Statistics reported a rise of 3.1% in Average Earnings for April which was above the analyst estimate of 2.9%.

Technical Analysis

Overhead resistance at 1.2744 has been a major hurdle for GBP/USD since last week. The pair tested it three times last week but failed to make a sustained break.

What leads me to believe the pair remains bullish, despite yesterday’s sharp fall, is that it continues to hold above its 100 moving average on a 4-hour chart.

Yesterday’s decline had resulted in a bearish engulfing daily candle. However, if the pair holds near current levels into the end of the day, that signal would be invalidated.

In yesterday’s report, I talked about 1.2662 support as a possible area where the pair might turn around. So far, it looks like it has reversed back into an uptrend.

I consider the level to be critical in the near-term. And while above it, I continue to view the pair in an uptrend that started at the end of May.

Resistance at 1.2714 seems to be holding the pair thus far. Any dips into the North American session should be bought to maintain the upside moment.

Bottom Line

• GBP/USD has reaffirmed its uptrend with today’s rally. It should hold near or above 1.2715 into the close to maintain an upside bias.
• Dips should be bought in the near-term, I see support at 1.2690.
• Resistance at 1.2744 has been important and capped three rallies so far.