GBP/USD – Holding Above 1.40?

Momentum remains with the pound

The pound has been on an incredible run against the dollar, smashing through 1. 40 over the last week and gathering momentum to extend its gains.

When you look at where price is compared to the moving averages, there is an argument that the move is now quite overextended and perhaps poised for consolidation or a correction. But the MACD and stochastic just don’t back this up yet.

We have seen some consolidation over the last 48 hours, but the price is still very stretched regardless. Should we see a move back towards 1. 40 then this would bring it back towards the moving averages on the 4-hour chart and could generate some interest once more.

We’ve just seen a lower high so a small pullback wouldn’t be an enormous surprise and on the daily chart , it would only represent a very modest correction. It would also roughly coincide with the 61.8% retracement of the move from 17 Feb lows to 23 Feb highs.

The vaccine rollout in the UK has been the primary driver behind the pound’s outperformance, with traders seemingly banking on a super-charged recovery this summer as a result of the lockdown being lifted. Life should be back to normal by 21 June under the current roadmap.

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Former Craig

Former Craig

Former 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.