GBP/USD Technical Analysis
The daily chart below shows how the US Dollar has consistently lost ground since October 2022. The US Dollar, which was one of the most heavily traded trades in 2022, was heavily sold off as the market began to price in a less hawkish Fed with an earlier-than-expected pause.
However, as the recent NFP report and ISM Services PMI showed a resilient economy, those expectations are dwindling. The culprit could be the recent easing in financial conditions, with treasury yields falling and the stock market rally.
The formation of a double top at the 1.2450 resistance level may indicate a significant shift in expectations now that Fed members have begun to hint at a possible higher terminal rate and the market has adjusted to the new developments.
If the price breaks through the neckline at 1.1845, the double top will be confirmed, and we could see a significant drop to 1.1200.
The best confluence zone would be at 1.2263, which is the swing resistance as well as the 61.8% Fibonacci retracement level.
There is no important economic data today, so the technicals should take the lead until tomorrow's US Jobless Claims report.
The divergence between price and MACD signalled a loss of selling momentum, resulting in the current pullback that is extending up to the 38.2% Fibonacci retracement level.
That would be the first level of resistance where sellers might try to re-enter the market. As previously stated, a stronger resistance level would be at 1.2263, where the 61.8% Fibonacci level and the swing resistance meet.