GBP/USD Daily Forecast – Sterling Extends Gains Despite Stronger Dollar
Sterling is the Top Gainer Among the Majors this Week
While the British pound has consistently under performed for a few months now, it is on track to post the largest weekly gain among the major currencies.
Sterling is up just over 1% against the greenback this week. If the pair manages to hold near current levels, it will result in a bullish engulfing candle on a weekly chart. This would signal the potential for further gains next week.
In a similar fashion, EUR/GBP is on track to post a reversal weekly candle as well as this week’s decline thus far has engulfed the gain from the prior week.
EUR/GBP briefly touched levels not seen since 2009 in the early week but has essentially given back gains for the month thus far in a 4-day decline.
Economic data out of the UK has exceeded expectations this week with both CPI and retail sales coming in ahead of the analyst estimate. Retails sales in the US came in ahead of expectations yesterday but did not contain the rally in GBP/USD.
In the session ahead, US building permits and the University of Michigan’s consumer sentiment gauge will be released. The data is not expected to impact the exchange rate much.
Technical Analysis
Considering the upward momentum this week, I expect that dips over the near-term are likely to be shallow. Since the 1.2100 handle offered decent resistance in the early week, this could be a level where buyers will look to step in on dips.
There is a level marked off on the above chart at 1.2153 which comes from a daily chart. Price has been trading around it and I see this more of a bull/bear line for a broader time frame.
Resistance at 1.2190 held several rallies in the prior consolidation. I view this level as upside resistance in the session ahead. Considering the light economic calendar, there doesn’t seem to be a catalyst for a move much beyond that.
Bottom Line
GBP is on pace to post the largest weekly gain among the majors.
The near-term trend has shifted to bullish.
The weekly candle points to further upside potential if the pair closes near current levels.
This article was originally posted on FX Empire