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The British pound currency broke to fresh multi-year highs against the US dollar earlier this morning, as the greenback continues to come under pressure from all directions on the foreign exchange market. The British pound was also the best performing major currency against the US dollar last week.
From a technical perspective thing look great for the GBPUSD pair after last weeks confirmed breakout above the 1.3750 area. Sterling had been trapped in a period of price consolidation between the 1.3600 to 1.3700 region over recent weeks.
Now that the period of consolidation is over it appears likely that the ongoing short, medium, and long-term uptrend in the GBPUSD pair is only going to accelerate. I would not be surprised to see the pair moving into a much-higher trading range between the 1.3750 to 1.4000 areas.
From a fundamental perspective the case for further sterling appreciation looks good. British Prime Minister Boris Johnson has started to outline a path for the United Kingdom to exit lockdown, which should provide further green shoots for the British pound.
On the other side of the pond, weakness in the US dollar currency is another big factor in why the GBPUSD pair is currently rallying. Last week’s technical breakdown in the US dollar index also bodes well for further sterling appreciation.
This week release of the FOMC meeting minutes and US retail sales also have the potential to accelerate sterling buying. UK PMI services data is also expected to see an uptick this week, following last month dire sub 40 headline reading.
For the record, last week sterling performed its highest weekly price close since April 2018. This underscores the scale of the technical breakout underway at the moment. The GBPUSD pair is now approaching some very interesting technical levels.
According to the ActivTrader Market Sentiment tool traders are becoming more bearish towards the GBPUSD pair. Traders are massively on the wrong side of the market right now
The ActivTrader Market Sentiment tool shows that some 78 percent of traders are bearish at the moment. Watch out for the uptrend to accelerate as long as the heavily negative sentiment continues.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame shows that a bullish inverted head and shoulders pattern will form now that the price has surpassed the 1.3866 level. The recent recovery from the 1.3780 area certainly hints that this pattern is going to play out.
According to the overall size of the bullish pattern the GBPUSD pair could reach the 1.3950 area. Due to the overall important of the 1.4000 area I suspect traders may attempt to test towards this level as well if the GBPUSD pair starts to gain traction above the 1.3950 area.
Source by ActivTrader.
GBPUSD Medium-term Technical Analysis
According to the daily time frame the GBPUSD pair has broken above the upper Bollinger Band on the Bollinger Band indicator. This is the first upper Bollinger Band breakout on the daily time frame since May 2019.
We should now expect a move towards the top of the monthly Bollinger Bands, around the 1.3922 level, while price holds above the 1,3866 level.
A massive, inverted head and shoulders pattern is in play, following the recent breakout above the 1.3500 level, which holds a 2,000-point upside projection. Bears need to be extremely careful trying to short and hold short the GBPUSD pair.
Source by ActivTrader.
