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British pound is the best day since October 2020, GBP / USD pushes through resistance


BRITISH POND FORECAST:

  • GBP / USD rise on Tuesday, with its biggest one-day rise since October 2020
  • British pound rises supported by strong UK employment data and broad-based US dollar weakness
  • This article looks at cable’s most important technical levels to keep an eye on in the near future

Most read: USD Technical Analysis – DXY, EUR / USD Reverses to Sentiment Extremes

The British pound soared on Tuesday, driven by broad-based US dollar weakness, but more importantly, strong British economic data. In the late trading session during the New York session, GBP / USD rose 1.3% to 1.2482, which she largest single-day rally since October 2020.

Earlier today, UK employment figures showed that the country added 83,000 workers in February, expectations for a net increase of 5,000 jobs beat beautiful. With this result, the unemployment rate fell by 3.8% to 3.7%, reached its lowest level in almost half a century.

Although n Single report does not substantially change the overall outlook, today’s data has helped alleviate concerns that the economy is on a significant swing down and has increased the likelihood that the Bank of England will have to raise interest rates more forcefully to ensure that rising nominal wages, a product of tight labor market, do not already exacerbate very high inflation.

Sterling is also supported by external forces. The dollar’s widespread decline in the foreign exchange market, caused by improved sentimentalso favors more risky currencies, which has sold in recent weeks on fears that the world economy could fall off the cliff and stay stuck in a stagflationary environment.

Looking ahead, FOMC Chairman Jay Powell ruled out more aggressive rate hikes, so we may have peaked Fed hawkishness for now, except for new surprises on the inflation front. This can cause the treasury returns top out around recent highs, which deprive the US dollar of a major bullish catalyst.

Meanwhile, the BoE, with its credibility on the line and CPI heading for double digits in the second half of the year, may begin to sharpen rates more powerfully to restore price stability. In fact, markets price a 30% chance that the bank will resort to a 50 bprate increase at its June meeting following today’s employment data (bets may consolidate in the coming days). Against this background, GBP / USD may move higher in the near term, but sustained gains are unlikely to be given current teenwind faced by the British economy.

In terms of technical analysis, GPB / USD broke above a key ceiling in the 1.2400 area. If buyers retain control of the market in the coming sessions, we may see a move to 1.2650 in short order. On the other hand, if sellers return and the exchange drives lower, initial support now stands at 1.2400. On further weakness, the focus shifts down to the 2022 low of around 1.2165.

GBP / USD TECHNICAL CARD

GBP / USD Chart Prepared Using TradingView

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— Written by Diego Colman, market strategist for techlives

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