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In the second half of May, the British pound showed notable strength: from its 12 May low, GBP/USD climbed to a peak on 26 May — marking its highest level in over three years.
Demand for the pound has been driven by several factors:
→ A surge in inflation. CPI data released last Wednesday came in above expectations. As a result, market participants interpreted this as a reason for the Bank of England to remain cautious about cutting interest rates. Holding rates at elevated levels is generally considered bullish for the pound.
→ The pound’s relative resilience amid trade tensions, particularly following a newly signed agreement with the US, as well as strengthening trade ties between the UK and the EU.
Can the pound continue to rise? The GBP/USD chart offers reasons for doubt.
Technical Analysis of the GBP/USD Chart
Recent price movements have formed an ascending channel (outlined in blue), and earlier this week, demand was so strong that the pair briefly moved above the upper boundary. But what happened next?
That strong buying momentum appears to have faded — resulting in a sequence of lower highs (A→B→C→D), suggesting that the market may be searching for a foothold. Today’s bounce (highlighted by the arrow) hints that such a foothold may have been found. But how reliable is it? And can the uptrend be resumed?
→ From a bullish perspective: Support may be provided by the lower boundary of the channel, reinforced by the 1.345 level.
→ From a bearish perspective: The 1.352 level is acting as resistance, further strengthened by the median line.
It is possible that the area marked by lower highs (A→B→C→D) could ultimately prove to be an insurmountable barrier for the developing uptrend on the GBP/USD chart.
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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
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