Pound Sterling Looking to Extend Recovery as U.S. Dollar Runs on Fumes

– GBP/USD reclaims 1.38 but faces overhead resistance this week.
– Needs to retake 1.39+ to extend higher, may be aided by UK data.
– As priced-in U.S. recovery, Fed policy sees USD run short of breath.

The Pound-to-Dollar exchange rate (GBP/USD) enters the new week 0.30% higher at 1.3895 and will look to make Monday its sixth consecutive daily advance.

Concerning the immediate outlook, technical resistance could bar its path higher on the charts, but with investors showing signs of having fallen out of love with the U.S. greenback all over again, a further recovery of recently lost ground may be just a matter of time for Sterling.

The Dollar fell against all major counterparts last week, while the Euro continued its April recovery and recently underperforming commodity currencies like the Australian and New Zealand Dollars topped the major currency league table.
GBP/USD spot rate at time of writing: 1.3855
Bank transfer rate (indicative guide): 1.3470-1.3567
FX specialist providers (indicative guide): 1.3676-1.3758
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The run higher by GBP/USD wasn’t quite enough to get the British currency out of the metaphorical woods however, and it would risk being sidelined unless it can rise above 1.3920, some analysts say.

“In order to reassert upside pressure, the market will need to overcome resistance above 1.3920 and so far remains capped by the 1.3832 resistance line,” says Karen Jones, head of technical analysis for currencies, commodities and bonds at Commerzbank. “It is on the defensive and will remain so while capped here.”

Sterling rose from 1.3670 to 1.3830 last week, the former being a level at which the exchange rate was bought by Jones, although the Pound hasn’t yet been able to get above the resistances flagged by her or the nearby 55-day moving-average located around 1.3845.

“We look for a test of the 55-day average, price resistance and potential downtrend at 1.3838/55, with fresh sellers expected here at first,” says David Sneddon, head of technical analysis at Credit Suisse.

“Above in due course though can see strength extend back to 1.3919 above which is needed to see a “double bottom” base complete to reinforce our view the decline from the 1.4237 late February peak remains only a corrective phase within the core longer-term uptrend,” he adds.

Fortunately for Sterling, Dollars have been sold widely of late in what has been the strongest indication that the U.S. exchange rate rebound of 2021 has all but run its course.