GBP/USD has been going up since it dropped below 1.2030 earlier in the day. It is now above 1.2100. The sharp rise in Wall Street’s main indexes after a mixed opening makes it hard for the USD to find buyers and gives the pair a boost.
Technical Overview
The last time GBP/USD was traded, it was at 1.2060, which is where the 200-period Simple Moving Average is on a four-hour chart. At 1.2040, the 100-day simple moving average (SMA) and the Fibonacci 38.2% retracement of the most recent uptrend provide strong support. If that support breaks, the pair is likely to keep falling towards 1.2000 (a psychological level and Fibonacci 50% retracement) and 1.1950 (Fibonacci 61.8% retracement).
On the way up, 1.2100 (a psychological level and the 23.6% Fibonacci retracement) is the first point of resistance before 1.2140 (a former support level and a static level) and 1.2200. (end-point of the latest uptrend, static level, psychological level).
Fundamental Overview
After recovering to the 1.2100 area early Thursday morning in Europe, GBP/USD has lost its momentum and lost the day’s gains. Mixed market sentiment keeps investors on the sidelines while they wait for the European Central Bank (ECB) to announce its policy decisions. This makes it hard for the pair to gain bullish momentum.
Even though investors aren’t as worried about Credit Suisse going bankrupt as they were before the Swiss National Bank said that the bank had enough capital to get more cash if needed, they are still being careful as Thursday begins. The bullish opening gap in the UK’s FTSE 100 Index was partially erased, and the index was last seen up 0.4% for the day.
The ECB is likely to raise its key rates by 50 basis points later in the day. If the ECB talks about how the economy is changing and takes a “dovish” stance by not promising any more big rate hikes, the Euro is likely to face selling pressure.
In that case, the uncertainty about what the US Federal Reserve will do next could cause some money to move out of the Euro and into the Pound Sterling. So, a sharp drop in the EUR/GBP pair could help the GBP/USD pair go up. On the other hand, if the Euro gets stronger again because of an unexpectedly hawkish move by the ECB, the US Dollar should get weaker against its major rivals. In that case, too, GBP/USD could gain bullish momentum, but a sharp rise in EUR/GBP could slow the pair’s rise.
Weekly Jobless Claims and February Housing Starts and Building Permits will be on the US economic agenda. Before the ECB event, these data releases are not likely to have a big effect on the market.
Source: Team CurrencyVeda
