GBP/USD Buyers Prepare to Challenge a Key Resistance Level
Market Overview
On Thursday, GBP/USD buyers have shown renewed vigor, attempting to break above a significant resistance level after three consecutive days of bullish movement. Expectations set by Bank of England Governor Andrew Bailey have reinforced optimism. Bailey indicated that only four rate cuts are likely in 2025, a position echoed by the Organisation for Economic Co-operation and Development (OECD), which predicts UK inflation will stay above the 2.0% target for the foreseeable future. This suggests that UK interest rates will remain considerably higher compared to the Eurozone, where the European Central Bank (ECB) is expected to lower its key rate to 2.0% by late 2025. Such expectations have lent support to the British pound, propelling it higher against the U.S. dollar in recent sessions.
Simultaneously, the U.S. labor market shows early signs of cooling, evident from the recent ADP data and weaker-than-anticipated PMI figures from the services sector, pausing US dollar rally.
Technical Analysis
On the four-hour chart, GBP/USD has embarked on its third consecutive day of gains following a period of price compression. The pair is currently rebounding from the lower boundary of a 20-month descending channel. The key level under scrutiny is the immediate resistance at 1.27495, with buyers making a sustained effort to achieve a breakout. Successfully closing above this resistance would represent a break of the Bollinger Band squeeze pattern, suggesting an increase in volatility, which could propel GBP/USD to higher targets of 1.28045, 1.28316, and ultimately 1.28823.
Oscillators Confirmation
Oscillators are largely supporting the bullish scenario at present. The Relative Strength Index (RSI) remains comfortably in positive territory, while the MACD also maintains a bullish crossover, suggesting strengthening momentum. The moving averages, particularly the 50-period and 100-period, are beginning to trend upwards, which adds additional confirmation for a potential bullish breakout.
Alternative Scenario
Conversely, if bullish momentum falters, sellers could take advantage of the situation by targeting the last major support level at 1.26167, situated at the lower boundary of the recent squeeze. A decisive break below this level would invalidate the bullish outlook, potentially returning the pair into a downward correction.
Key Levels
- Resistance Levels: 1.27495, 1.28045, 1.28316, 1.28823
- Support Levels: 1.26988, 1.26167
Key Events to Watch
Key economic data releases will be crucial for determining GBP/USD’s next move. The UK Construction PMI report, set to release shortly, alongside the US October’s trade balance figures, will be closely watched by market participants. Additionally, U.S. weekly jobless claims on Thursday and non-farm payrolls data on Friday remain pivotal.
Conclusion
GBP/USD is testing key resistance at 1.27495. A successful break above this level could trigger further gains towards higher resistances at 1.28045, 1.28316, and 1.28823. However, a failure to maintain bullish momentum could lead to a retest of support at 1.26167.
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