The British pound currency has continued to rally against the US dollar as the greenback falls broadly on the currency market due to hopes that inflation has peaked.
On Friday, as sterling tackled the 1.2400 level the up move appeared to be driven by strong gains in US equity markets, and especially technology stocks.
Basically, tocks started to rally after Fed voting member Waller said “If markets are right and inflation is coming down, that’s great news. Would have no problem changing policy.”
As you can see, the main driver for sterling strength appears to be from expectation that the Fed will reduce rate hikes and other central banks will be more aggressive.
Much evidence on the charts suggests that the GBPUSD pair will continue to go higher according to the existence of many bullish reversal price patterns.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are growing more bearish despite the recent sharp price ramp.
With 59% of traders currently bearish, so it should be noted that this current sentiment reading is highlighting that sterling still has much scope to trade higher.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, clear price range breakout has emerged for sterling, with the break happening around the 1.2300 level.
A bullish inverted head and shoulders pattern is also close to being underway. According to the overall size of the pattern, I would expect that we could soon see a further 700 point more upside in GBPUSD.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair is starting to form a much larger bullish reversal pattern, and appears to be targeting the 1.2800 to 1.3000 area.
According to the technical analysis a break above 1.2400 and the long-term trend is once again bullish. As mentioned early, this is a very important development for bulls to then tackle 1.3000.