GBP / USD Technical Analysis: Bulls Continue To Dominate
Geopolitical tensions eased and the dollar weakened after the US jobs report. This contributed to a strong bullish rebound in the GBP / USD currency pair, to the resistance level of 1.4146, the currency pair’s highest two and a half months ago. It stabilized around 1.4138 at the start of Wednesday’s session, in cautious anticipation of the announcement of UK economic growth figures and the reading of inflation in the US.
This can cause a strong reaction to the performance of the currency pair.
Overall, investors have now largely ignored political considerations, increasingly focusing on the Bank of England‘s seemingly bullish outlook for the UK economy and buying up sterling. Many forex analysts noted that the GBP’s earlier week gains were actually a late reaction to the Bank of England’s (BoE) previous Thursday event. Commenting on this, Chris Turner, analyst at ING Bank, said: “We read this step as a bigger legacy as the market moves towards the overall bullish expectations of the Bank of England in the UK.
Bank of England economic forecasts show the UK economy will now return to pre-Covid 19 levels in 2021, after experiencing the largest increase in annual growth since 1947, a marked improvement over previous expectations . As a result, the Bank of England expects the country’s GDP to grow in 2021 by 7.25%, a significant increase from the 5.0% expected in February, as the bank’s economists say the The improvement is due to progress in immunization and financial support from the government.
The Bank of England now estimates that the country’s unemployment rate will peak at 5.4% in the third quarter of 2021, down from the previously expected 7.8%. Given the Bank of England’s significantly improved expectations for the UK economy, ING now expects GBP / USD to split towards the resistance levels 1.4200 and 1.4250 respectively.
Meanwhile, forex analysts saw that last week’s local and regional elections gave investors reasons not to buy sterling, especially as the SNP’s strong performance could lead to a constitutional showdown. between the Scots. Administration and Westminster on holding a second independence referendum. So the speech leading up to Thursday’s vote was that the SNP majority would in fact provide a strong mandate for another vote.
But given that the Scottish National Party has failed to achieve a majority, analysts say the road to another referendum is certainly more difficult and can only happen over a number of years. “The separatist parties will have to quickly resolve the differences that prompted them to campaign separately in the first place,” said Fabrice Montany, economist at Barclays Bank. The complexity of Scottish independence means that members of such a pro-independence coalition will almost certainly disagree on the practical implementation, which could weaken the cause of independence ”.
The Scottish National Party will form a government with the help of the Green Party, whose eight seats will allow the coalition to govern effectively. Meanwhile, Scottish National Party leader Nicola Sturgeon has said she will only lead her government to a referendum once the COVID-19 pandemic is dealt with.
According to the technical analysis of the pair: The general trend for GBP / USD is still up, and there will be no downward change in direction without breaking through the 1.4000 support. Despite recent gains and depending on the performance on the daily period chart, there is still an opportunity for the currency pair to make gains before these indicators reach strong levels of buy saturation.
The closest resistance levels currently for the pair are 1.4195, 1.4255 and 1.4340 respectively. After the confidence of the Bank of England, and in case the UK economy continues to improve and after the storm of political concern has passed, I prefer to buy the currency pair at all bearish levels.
As for the economic calendar data today: From Great Britain, the growth rate of the British economy will be announced, along with the figures for the merchandise trade balance, the rate of industrial production, the rate of investment in enterprises and the rate of industrial production. From the United States, the most important reading of the US Consumer Price Index and comments from some US central bank policymakers will be announced.