GBP/USD to get a drift lower first regaining its sails to ride higher again – DBS Bank

GBP’s strong recovery from 2021’s year-end lows is losing momentum. As Benjamin Wong, Strategist at DBS Bank notes, technical readings suggest the cable needs to cool its December rally as it heads towards the weekly chart’s 1.3627 key resistance.

December rally to cool off

“The technical indicator is now positioned into a stretched reading as GBP starts to walk into a resistance zone fashioned by a weekly chart pivot at 1.3627, which trails from the early June 2021’s 1.4248 peak. Ahead of that, the 100-day moving average (DMA) resistance also sits at 1.3563; and the 200-DMA, which successfully contained and retarded a rally from 1.3412, is above the 1.3627 pivot at 1.3745.” 

“GBP is now walking into a price zone where resistance of sorts is likely to hinder its progress unless it pulls over a sustained rally over 1.3755.”

“While in the short-term GBP/USD should see a cooling-off phase and struggle to maintain upside impetus, its 2021 performance is not that bad. The 50-month moving average marked at 1.3203 offers robust support (having been tested twice and held); hence a decline from current levels does not appear sustainable to develop into an outright bearish path. 1.3203 and 200-week moving average pegged at 1.3143 remain levels where buyers would attempt to regain the wheel. Only such a breach under these supports unlocks the 50% Fibonacci retracement of GBP’s rally from covid ashes at 1.2830.”