GBP/USD Forecast – British Pound Recovers on Friday

GBP/USD Forecast Video for 03.07.23

British Pound vs US Dollar Technical Analysis

The British pound has rallied a bit during the Friday session, showing signs of life again as we have broken back above the 1.2650 level. This is an area that has been important a couple of different times, and now that we have broken above the top of the Thursday inverted hammer, it’s technically a buy signal. That being said, the market is still going to be very choppy, so that doesn’t necessarily mean that you want to go into the market with a huge position, but it certainly seems to be favoring the upside.

With inflation in the United Kingdom still raging, it does make a certain amount of sense that the British pound continues to strengthen. If the market can break above the massive selloff on Wednesday, then it opens up the possibility of retesting the recent high. After that, then you have a real possibility of reaching toward the 1.30 level, which is a large, round, psychologically significant figure.

Underneath, the 50-Day EMA continues to offer support as well, so I look at that as a potential dynamic support level. If we were to break down below there, it opens up the possibility of a move down to the 1.2350 level, which is an area that has been important previously. Furthermore, we also have the 200-Day EMA in that general vicinity, so that could offer a bit of technical support also. All things being equal, I think this remains a “buy on the dip” market, and I think that it is probably only a matter of time before we really start to take off, especially if we can break above the 1.30 level.

However, breaking down below the 200-Day EMA would completely change the overall attitude of the market, and therefore send the US dollar much higher. I think the British pound remains an outlier against the US dollar in comparison to its contemporaries, meaning that it has a certain amount of strength that most other currencies don’t have at the moment. I believe it will continue to be very noisy, but ultimately it looks like the buyers are starting to win the argument again.

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