Temporary Halt to the Gains

The recovery in GBP/USD reached 1.2331 on March 28, but the 2023 high is still ahead at 1.2448.

Taking advantage of the US dollar’s decline, the bulls succeeded in pushing the GBP/USD exchange rate towards the 1.2362 resistance level, before settling around 1.2300 at the time of writing. The currency pair was positively affected by the improvement in investor sentiment and the gains in global stock markets, as fears of a continuing collapse of the global banking system subsided.

Technical analysts are evaluating the GBP/USD exchange rate and say that further gains in the pair’s price could reach 1.27 over the coming weeks, although notable resistance must be recognized first. A move to 1.27 would give sterling sellers their biggest buying power since April 2022, a time of decline for the exchange rate due to the global stock market sell-off and growing expectations of higher interest rates at the Federal Reserve.

A year later, those expectations have subsided and the US dollar has begun to weaken, although concerns about the health of some sectors of the banking industry continue to provide pockets of support for the greenback. Meanwhile, the British pound finds itself outperforming its peers as sentiment towards the UK improves.

Bill McNamara of The Technical Trader said that “GBP/USD has returned to the best with investors over the past two weeks, and its safe haven appeal has lifted the price to levels last seen a year ago.”

 But Broux says the pound has also benefited from the bright economic outlook in the UK, which includes two strong sets of growth-aligned PMI releases in February and March, as well as upgrades to GDP forecasts from the Bank of England.

Société Générale analyst says that closing positions that sought to take profits from further declines in the pound (short positions) also offered a mechanical bid to the pound.

GBP/USD hit its lowest level since December at 1.1804 on March 08 but has since rallied as the UK has moved out of the spotlight amid banking turmoil in the US, Eurozone, and Switzerland. Banking pressures in the US have led investors to lower expectations for the number of interest rate hikes the US Federal Reserve will release over the coming months, while expectations for interest rate cuts have risen starting in the second half of the year.

The recovery in GBP/USD reached 1.2331 on March 28, but the 2023 high is still ahead at 1.2448.

April is a strong month for the pound-dollar exchange rate on a seasonal basis, and dollar buyers are hoping for a repeat of this pattern. But two important dates await the pound next month: UK jobs and wages (April 18) and inflation (April 19), where stronger-than-expected releases are likely to boost the pound. However, weaker data could lead to a weaker pound as this would reduce the odds of a BoE rate hike in early May.

According to the performance on the daily chart below, the most prominent upward path for the performance of the GBP/USD currency pair, taking into account that its gains move the technical indicators towards overbought levels.

Unless the pound gets additional bullish momentum, the currency pair may be exposed to profit-taking sales. According to the recent performance, the closest resistance levels for the currency pair are 1.2385, 1.2420, and 1.2500, respectively.

On the other hand, over the same period of time, breaking the support level of 1.2145, ending the pair’s bullish aspiration. Today will be affected by the announcement of the growth rate of the US economy and the number of weekly jobless claims. There is no significant UK data available today.


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