GBP/USD Rally Due for a Minor Pause?

GBP/USD, British Pound – Technical Outlook:

• GBP/USDThe broader trend of
• However, some softening in the pair cannot be ruled out ahead of key UK data
• What are the notable signposts?

A negative divergence in the daily chart suggests that the pound’s rally against the US dollar is losing momentum in the short term, with a correction/minor setback ahead of key UK data due this week. shows the possibility of

A ton of UK data is due out this week, starting with Tuesday’s employment data. Inflation data on Wednesday; his Gfk consumer confidence, retail sales and April flash PMI on Friday. UK core inflation is expected to soften to 0.6% in March from 1.2% in February, while headline inflation is expected to ease to 9.8% last month from 10.4% in February. Moreover, any signs of rapid wage growth could keep inflationary pressures in check.

GBP/USD 240 minute chart

Charts created using TradingView

The Bank of England raised bank rates by 25bps in March, leaving room for further hikes if inflation shows signs of ‘sustaining’. So this week’s data is crucial in deciding whether the BoE pauses or if he goes ahead with one more rate hike. The market is pricing in a 67% chance that he will raise rates by 25bps at the May 11 meeting.

GBP/USD weekly chart

Charts created using TradingView

Meanwhile, a color-coded candlestick chart based on trend/momentum indicators shows that GBP/USD is still in a bullish stage on the daily chart. However, as we mentioned in our last update, please refer to “British Pound Pricing: GBP/USD, EUR/GBP, GBP/JPY” published on March 29th. Horizontal channel from the end of 2022.

GBP/USD daily chart

Chart created by Manish Jaradi using TradingView

The upper end is a horizontal trendline around 1.2450 and the lower end is a similar trendline around 1.1850. A break above the upper end of the range could trigger a bullish break out of the channel and open the door for a move to 1.3000.

However, the GBP/USD rally is showing signs of fatigue, suggesting the time may not be ripe for a bullish break (although the broader trend is rising). The 4-hour chart has broken below the minor uptrend channel since mid-March, confirming that upside pressure may be easing. In this regard, the key support is his April 10th low of 1.2345.

GBP/USD daily chart

Charts created using TradingView

A break below would trigger a minor double top (high of the month) and pave the way to 1.2200. Nonetheless, the 89-day MA, 200-day MA, and the lower end of the horizontal channel have fairly strong cushions that can cap the downside.

— Written by DailyFX.com Strategist Manish Jaradi.

— Contact and follow Jaradi on Twitter: @JaradiManish