Pound bulls dominated the scene on Monday as investors welcomed an easing political risk for the United Kingdom.
The falling likelihood of a second Scottish independence referendum in the near term following last week’s election boosted buying sentiment towards Sterling. A broadly weaker dollar also played a role in propelling the GBPUSD to its highest level since February 25th.
With Covid-19 cases falling, two-thirds of UK adults receiving a first dose of the vaccine and the next phase of lockdown easing scheduled on May 17th, the economic outlook for the post-pandemic UK remains bright. This may translate into a stronger Pound over the next few weeks.
Can the GBPUSD push higher?
Looking at the daily charts, the technicals are heavily bullish. The GBPUSD has jumped over 150 pips today and a total of 350+ pips since the start of May! Prices are trading comfortably above the 20-day and 50-day Simple Moving Average while the MACD trades above zero. A solid daily close above 1.4100 could provide a platform for bulls to springboard prices towards 1.4200 and the 2021 high of 1.4240.
One thing to keep in mind is that the Relative Strength Index (RSI) is very close to hitting 70 which suggests that the GBPUSD is overbought and may be primed for a technical pullback. Should prices fail to keep above 1.4100, a decline back towards 1.4000 and lower could be on the cards.
Zooming out on the weekly charts, there have been consistently higher highs and higher lows. Prices are trading above the 20-week Simple Moving Average while the MACD trades above zero. A strong weekly close above the 1.4000 resistance could encourage an incline towards 1.4240 which is the 2021 high. A move beyond this point could see the GBPUSD test 1.4350 – a level not seen April 2018.
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