GBPUSD Breaks Trendline Resistance and Taps 5-Week Highs; Can It Extend Its Gains?

GBPUSD
GBPUSD

GBPUSD opened this week’s trading higher as the British pound benefited from oil price war news over the weekend. The currency pair opened at 1.3075, higher than where it closed on Friday at 1.3049. It also tapped its five-week high at 1.3125.

Over the weekend, Saudi Arabia announced an oil price war. This follows after OPEC+ talks broke down last week when Russia did not agree to the country’s request for higher production cuts. Consequently, Saudi Arabia announced production hikes and discounted prices for its crude oil in an effort to take a bigger market share.

Following the news, lower-yielding currencies like the yen, Swiss franc, and the euro benefited. GBPUSD also rose in response given the positive correlation it shares with EURUSD.

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GBPUSD Outlook

On the daily time frame, GBPUSD broke through resistance at the falling trend line from connecting the highs of December 13 and January 31. The currency pair is trading lower in today’s Asian session which could suggest that it may pare some of its gains. By drawing the Fibonacci retracement tool from the low of February 28 to today’s high, we can see that GBPUSD could find support at the 38.2% Fib level. This price, around 1.2975, also coincides with the 100 SMA and the broken trend line.

Conversely, if there are enough buyers in today’s trading, we may only see limited downward movement on GBPUSD. The currency pair may only fill the weekend gap and find support at last week’s close at 1.3049. Reversal candlesticks at this price could then mean that GBPUSD may soon retest today’s Asian session highs at 1.3125.

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