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The British pound currency has continued to hold towards the best levels of the year against the US dollar due to the strong correlation between GBP and stock gains in the US.
The positive correlation returned due to upbeat tech earnings from Meta Platforms and Amazon, allowing GBPUSD to finally breakout above the 1.2500 threshold.
Also, the soft US GDP report for the first quarter helped as the headline US Q1 GDP number missed estimates of 2.0% quarter on quarter by a wide margin at 1.1%.
Investors now look to the Fed meeting this week for more clues if the breakout is valid. Attention is focused on a rate hike as the odd are ramped up towards a 25 basis points to 86% according to the Fed Funds Rate tool.
Going forward, the Bank of England could continue to hike rates under these circumstances, which is likely to be further supportive for the British pound currency, while the Fed may scale back hikes.
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 reversal.
With 37% of traders currently bullish 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, a clear head and shoulders pattern has been invalidated, with the break happening around the 1.2550 level.
According to the overall size of the pattern, I would expect that we could soon see a 400-point upside in GBPUSD, marking an expect rally towards the 1.2800 to 1.3000 area for sterling.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair is starting to settle above the Ichimoku support area, meaning the trend is very bullish.
According to the technical analysis GBPUSD is bullish and is getting a buy signal from the Ichimoku indicator that more medium-term upside like now.
