- The GBP/USD pair extended its rally after retesting the uptrend line and the 61.8% retracement level.
- A valid breakout above the 78.6% retracement level could announce an upside continuation.
- The upside scenario remains valid as long as the GBP/USD pair stands above the uptrend line.
Our GBP/USD forecast sees the pair rallying in the past few hours and now is trading at 1.3690 level right below 1.3695 daily high.
The Pound dragged the rate higher as the USD was punished and weakened by the DXY’s sell-off. Technically, the bias was bullish, so the current growth was natural. As you already know, the greenback dropped aggressively after the Fed Chair Powell Testifies.
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At the time of writing, the Dollar Index drops like a rock, it seems unstoppable, that’s why the USD continues to drop.
Fundamentally, the United States Consumer Price Index, the CPI, reported a 0.5% growth in December versus 0.4% expected and compared to 0.8% in November. In addition, the Core CPI rose by 0.6% in the last months versus 0.5% estimates and versus the 0.5% growth in the previous reporting period.
It remains to see what will happen and how the USD will react after its massive sell-off. This could be only a temporary one, the traders could go long again on the USD as the Federal Reserve is expected to hike rates soon as the inflationary pressure grows.
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GBP/USD Forecast – Price Technical Analysis
The GBP/USD pair ignored the weekly R1 (1.3645) and the 78.6% (1.3689) retracement level and now is almost to reach the 1.3707 weekly S2. It has rallied after retesting the uptrend line and the 61.8% retracement level.
Its breakout above the ascending pitchfork’s median line (ML) signaled an upside continuation. As long as it stays above the uptrend line, inside of the ascending channel’s body, the GBP/USD could climb towards fresh new highs.
Validating its breakout above the 78.6% retracement level, a minor consolidation may announce further growth. 1.3700 psychological level stands as an important upside target, it remains to see how it will react around this level.
An upside continuation could be invalidated only by a false breakout above the 78.6% retracement level.
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