GBP/USD rose for the second day in a row, extending its recovery from two-and-a-half-month lows.
A near-term bullish breakout through a one-and-a-half-week-old descending channel was verified by the momentum.
Before initiating strong bullish wagers, use caution due to mixed technical signs on hourly/daily charts.
On Monday, the GBP/USD pair extended its post-NFP goodish recovery move from two-and-a-half-month lows, gaining traction for the second session in a row. During the mid-European session, the pair reached three-day highs, around the mid-1.3800s.
Following an unexpected spike in the US unemployment rate, investors lowered their expectations for an earlier than expected policy tightening by the Fed. As a result, the bulls of the US dollar were put on the defensive, and the GBP/USD pair was pushed higher.
Expectations that UK Prime Minister Boris Johnson will relax most limitations in England on July 19 acted as a tailwind for the British pound. The GBP/USD pair received a further lift as a result, and the upward trend continued.
The GBP/USD pair verified a bullish breakout through resistance defined by the upper end of a one-and-a-half-week-old descending trend channel from a technical standpoint. Before positioning for any more gains, bulls will need to see a sustained advance past the 1.3850 confluence level.
The 50 percent Fibonacci level of the 1.4000-1.3732 decline, as well as the 50-period SMA on the 4-hourly chart, make up the stated zone. In the absence of fundamental signals, this should now serve as a significant pivotal point for traders in determining the GBP/USD pair’s near-term trend.
Technical indicators on hourly charts, on the other hand, have been gaining positive traction but have yet to rebound from bearish territory. To establish that the GBP/USD pair has bottomed out near 1.3730, a sustained move beyond the 1.3850 zone is required.
The next significant barrier is located around the 1.3900 mark, at the 23.6 percent Fibo. level. The 1.3925-30 supply zone follows, above which the GBP/USD pair appears poised to build on its momentum and reclaim the crucial 1.4000 psychological milestone.
On the other hand, the 38.2 percent Fibo. level, located around 1.3835, currently appears to be protecting the immediate downside ahead of the daily swing lows, located around 1.3815. Any further drop could be viewed as a buying opportunity, as long as it stays below the trend-channel resistance breakpoint.
A convincing break below the latter, which is now around the 1.3800-1.3795 zone, would rule out any further gains and expose the GBP/USD pair to risk. The next important level of support is around 1.3730, or the monthly lows reached on Friday just ahead of the 1.3700 mark./n
