GBP/USD Remains Well-Supported on a Broadly Weaker Dollar
A weak dollar has dominated the major currencies this week although Sterling has struggled to benefit from it.
A strong appetite for risk has weighed on the dollar and all of the major currencies have gained against the greenback this week as a result. The British pound, however, has gained less than most of its counterparts as concerns over Brexit and further monetary policy easing in the UK has weighed.
The session ahead is expected to be a volatile one. Here are some of the scheduled risk events:
- US President Trump will hold a press conference regarding China. The announcement was made late yesterday which has triggered some risk aversion
- Fed Chair Powell will speak later today. It will be his last chance to speak before the mandatory blackout period ahead of the June 11 meeting.
- The US will release its latest PCE index figures.
In addition to the scheduled risk events, trade adjustments are typically made at month-end which stands to further impact the markets today.
Technical Analysis
GBP/USD has been underpinned by a weaker dollar as the US dollar index (DXY) has fallen to lows not seen around the middle of March in early trading today.
While the pound to dollar exchange rate has benefited from this weakness, the pair is seen struggling to gain following a bullish break above a horizontal level at 1.2266.
This level is considered important as it acted as support in late April and early May and then proved to be a big hurdle last week.
So far, sellers have stepped in near 1.2350 with the 200 moving average on a 4-hour chart near there to create an obstacle for bulls.
A break above it shows further resistance at 1.2400 followed by 1.2476.
The pair was supported by a rising trend channel yesterday and once again shows upward momentum, but traders looking to take advantage of a weaker dollar may be better off looking at other currency pairs.
Key support for the session ahead remains at 1.2266 as the lower bound of the trend channel on a 4-hour chart is converging to the level. While above it, the next target for GBP/USD falls at 1.2398.
Bottom Line
- GBP/USD has fallen into a range but holds above key support to maintain a bullish outlook.
- The session ahead is expected to be volatile with several risk events and potential month-end trade adjustments that stand to move the markets.
For a look at all of today’s economic events, check out our economic calendar.
