The GBPUSD pair staged an extended price pullback on the foreign exchange market at the start of the week, despite positive news surrounding falling COVID-19 infection rates and the ongoing vaccine rollout.
Weakness in the US dollar has helped the GBPUSD pair recover back above the 1.3600 level, keeping the bullish can intact. Dip-buyers came in from the 1.3520 level, creating another bullish lower low on the weekly chart.
Arguable, bullish flows into the EURGBP pair at the start of the week were helping to drive the British pound lower. Traders were also factoring in the risk environment after Friday’s sell-off, as sterling does tend to perform well when the S&P500 is falling.
Regardless of the early-week trading action, the British pound does have some important technical and fundamental factors on its side. On the technical front, the short-term trend remains bullish while the price remains above the 1.3450 level.
Additionally, bulls set a new multi-year high last week. Typically, sterling traders may need to see the 1.3700 level retested before committing to big shorts. After setting higher highs for multiple weeks, the short, medium, and long-term bull case is still very much alive for the GBPUSD pair.
On the fundamental front, the Bank of England cast aside fears of negative interest rates last week. The UK economy is also seeing new overseas investment due to Brexit being completed. A recent report from the Economist suggests that strong is over 20 percent undervalued against the US dollar.
Speaking of fundamentals, the United Kingdom also has a plethora of important economic data releases out this week. UK Consumer Price Inflation, Producer Price Inflation, Retail Sales, and PMI Services and Manufacturing numbers all have the ability to impact sterling.
Perhaps the biggest concern for sterling bulls this week is the US dollar. The greenback has been catching a bid against most major currencies over the last two weeks. It still remains to be seen if the British pound can swim against the tide and continue rising while the US dollar is firms against other major currencies.
GBPUSD Short-Term Technical Analysis
The four-hour time frame shows that an inverted head and shoulders pattern remains valid while the price trades above the 1.3450 level. This is an important technical area as it is intersecting with the 200-period average on the four-hour time frame.
According to the overall size of the bullish price pattern the GBPUSD pair could rally towards the 1.4000 area if the pattern is activated.
It is noteworthy that the neckline, and trigger point, for the bullish pattern is located around the 1.3700 level. Watch out for strong gains in the GBPUSD pair this week if sterling starts to anchor itself above the 1.3700 level.
Source by ActivTrader.
If the bullish price pattern is invalidated, then watch out for the GBPUSD pair to take a mighty tumble towards the 1.3300 area, and possibly the 1.3200 level.
It is also worth noting that the short-term trend will turn bearish for the first-time this year if the price dips under the 1.3450 level.
GBPUSD Medium-Term Technical Analysis
Looking at the daily time, a huge bullish price pattern is active while the price trades above the 1.3500 level. The overall size of the pattern suggests that the GBPUSD pair could test towards the 1.4500 to 1.5000 area over the medium to long-term.
Clearly the fundamentals will drive the technical here. However, a potential path to the mentioned upside levels does exist. The daily chart shows that an explosive upmove towards the 1.4100 and possibly the 1.4300 levels remain possible in the medium-term if sterling starts to hold above the 1.3700 level.
Source by ActivTrader.