Earlier, we wrote that the GBP/USD will be facing a key test this week ahead of the Federal Reserve’s rate decision this evening, the Bank of England’s Super Thursday tomorrow and the US monthly jobs on Friday.
From a technical point of view, the bulls would be encouraged by the pound’s desire to climb back above the $1.30 handle, despite the Dollar Index (DXY) breaking to a new 2019 high above 98.00 last week. This is a bullish sign in that it shows relative strength for the pound, as the GBP/USD is comfortably above its 2019 low of 1.2442. At its weakest point last week at just below 1.2900, the cable had only shed half of this year’s gains. In contrast, the DXY broke to a new high last week, clearly suggesting that like likes of the EUR/USD has underperformed the GBP/USD. Indeed, the EUR/GBP cross is not too far off its 2019 lows currently.
Anyway, the cable has now broken back above its corrective bear trend and the 200-day moving average, as can be seen on the daily chart. As things stand, therefore, the path of least resistance is to the upside. Perhaps it would be more encouraging if the GBP/USD were to rise above its most recent high at 1.3135 level.
But with the aforementioned fundamental events to come, things could change quickly. Indeed, the GBP/USD approaching a key short-term resistance just below 1.3080. This level was support in the past. So, a potential pullback here should not come as surprise. Overall, though, it would require a move back below old resistance at 1.3020 for the short-term trend to turn bearish again.
Source: TradingView and FOREX.com