GBP/USD broke the upper edge of a rising channel and looks a bit overbought here. Considering that the 1.40 looms large, as an important psychological level, we should not discount a move back to it, especially that some traders may book profits toward the end of the trading month.
Cable benefited from three factors that contributed to the pair’s advance. First, the Brexit deal. Announced last December, it put an end to over four years of intense negotiations between the European Union and the United Kingdom. The markets loved the end of uncertainty.
Second, the United Kingdom is one of the countries that lead in the vaccination race against the COVID-19 pandemic. As such, optimism regarding a faster economic recovery and reopening fueled the GBP/USD rally.
Third, the ongoing dollar weakness helped the pair making important gains in February. Fed’s Powell testimony did not hint at anything related to the reverse of the bond-buying program, so the dollar got a green light for another leg lower.
GBP/USD Technical Analysis
Bears deciding to sell short the GBP/USD pair may want to wait for the price to get back inside the rising channel. Next, they might go short with a stop at the highs and target a move to 1.40. The 1.40 level acts as both dynamic and horizontal support, so it might be difficult to break on the first attempt.
GBP/USD Price Forecast