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GBP/USD Weekly Forecast: How Much Higher Can GBP/USD Go?

GBP/USD Weekly Forecast: How Much Higher Can GBP/USD Go?

Justin McQueen, Strategist

GBP/USDFUNDAMENTAL HIGHLIGHTS:

  • GBP Breaking Out to Fresh Highs
  • How Much Higher Can GBPUSD Go?
  • Broader Markets in Focus, Watch GBPJPY for Month-End

GBP Breaking Out to Fresh Highs

The Pound has gone from strength to strength, with GBP/USD breaking out to fresh highs above 1.4000. In a week that had been relatively light on the newsflow front from the UK perspective, the move has really been a continuation of the current narrative with a successful vaccine program providing a tailwind for the currency as the reopening of the economy nears. Economic data has been slightly more geared to the positive side, particularly with sentiment data after PMIs surprised on the downside. On the flip side, hard data in the form of retail sales remain weak, however, with the focus more on the reopening of the UK economy, the view that pent up demand will take fold once lockdown ends has seen traders shrug off soft retail sales data.

How Much Higher Can GBPUSD Go?

With the Pound trading at the highest level since April 2018, the question being asked is how much further has GBP got to go. On the technical front, there isn’t a significant amount of notable topside levels until the April 2018 highs at 1.4334 and 1.4374. However, with GBP/USD trading at overbought levels on the RSI, there is a risk of short-term pullbacks. Alongside this, seasonality also doesn’t favour the short-term outlook for the currency. On the downside, support sits at 1.3850 with the 20DMA below at 1.3780. Looking ahead to next week, there is little in the way for domestic data and as such, the ebb and flow of the broader risk environment will be closely watched for GBP. Elsewhere, next week also brings month-end into focus, where GBP/JPY is typically the outperformer (click here for data).

GBP/USD Chart: 10yr Seasonality

GBP/USD Weekly Forecast: How Much Higher Can GBP/USD Go?

GBPUSD Chart: Weekly Time Frame

GBP/USD Weekly Forecast: How Much Higher Can GBP/USD Go?

Source: Refinitiv

The Need to Know Guide on Trading the Pound (GBP)

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