The British pound currency is testing towards the 1.3150 resistance level against the US dollar after bond yields in the United States started to fall after finding a notable price ceiling on Monday.
In turn, the US dollar index started to retreat from above the 101.00 level, with the EURUSD rising and the USDJPY pair falling. The biggest gainer against the greenback was actually the British pound.
The latest CME futures report, released last Friday, showed that professional traders turned their most bullish towards sterling in four-months last week. This was also the case for institutions.
Generally, that is good news. I think we could be about to see a few months of reprieve for sterling, and that the 50-basis point rate hike from the FED is probably now priced-into the FX market.
I think we could easily see a coming run towards the 1.3500 resistance level. A move above the 1.3150 area would be a very positive step for sterling technically, with the 1.3300 area the next target above.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are currently turning bullish towards sterling.
With 57% of traders turning bullish, it should be noted that this current sentiment reading is down from last week by nearly 15%. A major rally, and a mild sentiment positive bias is still a good sign.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, technical analysis clearly shows that that GBPUSD pair is making impressive new higher highs, after rebounding sharply from the 1.3000 price area.
A break above the 1.3300 level has cause an inverted head and shoulders pattern ignited, hence we could see a coming attack towards the 1.3500 to 1.3600 resistance level.
GBPUSD Medium-term Technical Analysis
According to the weekly time frame, the GBPUSD pair could start to advance towards its 200-day moving average, which is a key technical metric that defines the medium-term trend.
A falling price channel is seen on the daily time frame, also with the current bounce from the bottom of the channel providing a powerful sign that the GBPUSD pair could finally be about to rally higher.