Key Insights
- GBP/USD is showing signs of recovery but remains below the critical 100-period EMA on the 4-hour chart, maintaining an overall bearish outlook.
- The RSI has crossed above the 50-midline, suggesting potential bullish momentum, with key resistance at 1.2680-1.2685 (confluence of upper Bollinger Band and 100-period EMA).
- Important support levels to watch are 1.2610 (lower Bollinger Band), 1.2583 (May 15 low), and 1.2502 (May 10 low), while upside targets include 1.2700 and 1.2740 if bullish momentum persists.
The GBP/USD is showing some signs of life in early European trading on Monday, finding a bit of support around the 1.2680 level. This uptick isn’t coming out of nowhere – it’s riding on the back of a weakening US Dollar, which has been under pressure since the release of those softer-than-expected US PCE Price Index data.
We’ve got the US ISM Manufacturing PMI for June coming out later today. This could really shake things up, potentially giving us more insight into the health of the US economy and influencing where GBP/USD heads next.
And let’s not forget about the UK general election scheduled for Thursday. Political events like this can throw a real curveball into forex markets, so we could see some increased volatility in Sterling as we approach voting day.
Read also! Best Time to Trade GBP/USD
GBP/USD technical analysis
The 4-hour chart is telling us that the overall bearish outlook for GBP/USD is still in play. We’re seeing the pair trading below the critical 100-period Exponential Moving Average (EMA), which is typically a bearish signal. However, and this is where it gets interesting, there are some undercurrents of bullish momentum starting to bubble up.
The Relative Strength Index (RSI) has just crossed above the 50-midline. For those of you who follow technical indicators, you know this could be signaling a shift in momentum towards the bulls. It’s not a guarantee, but it’s definitely something to keep an eye on.
Looking at key levels, we’ve got a resistance zone between 1.2680 and 1.2685. This area is pretty significant as it’s where the upper Bollinger Band meets the 100-period EMA. If the pair can break through this zone convincingly, we could see a push towards the psychologically important 1.2700 level. This level isn’t just a round number – it also lines up with the June 25 high, making it doubly significant. If the bulls really get their act together, the next target would be 1.2740, which was the high from June 19.
On the downside, initial support is hanging around 1.2610, coinciding with the lower Bollinger Band. If this level doesn’t hold, we could see a drop to 1.2583, which was the low from May 15. And if things really start to unravel, keep an eye on 1.2502 – that’s the May 10 low and a significant support level.