GBP/USD – Another run at 1.40?

Can it resist dollar comeback?

The pound has continued its impressive run against the dollar in recent weeks, despite the greenback having performed quite well against other currencies.

We’ve seen growing optimism around the UK economy this year following an impressive early rollout of the Covid vaccine which will enable the economy to reopen sooner and the recovery to be more powerful.

Obviously when it comes to the UK, we’re coming from a low base. Only a few months ago, we were facing the possibility of no-deal Brexit at a time when the economy had been among the hardest hit by the pandemic.

What it means now though is that cable is approaching 1.40 and there aren’t many signs of exhaustion in the rally. The stochastic and MACD on the daily chart still look very healthy.

That may of course change the closer we get to that major psychological barrier. For now, the pair has pulled back slightly and key support may be being eyed up as a possible rotation point.

That may have already happened, with the 61.8 fib from 12 Feb lows to 16 Feb highs appearing to have offered some support. But I’m not convinced. If it does push lower again, with the dollar appearing back in favour overall, it’s the longer term fibs on the 4-hour chart that will be of interest to me.

Here, the 38.2-50 fib region falls around the 55/89 SMA band, while the 61.8 fib falls around the 200/233 SMA band, both of which have been important support during this ascent. A break of these may suggest we’re in correction territory.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam