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Technical Analysis of GBP/USD

GBP/USD has been trading in the tight 1.5600-1.6000 range since end January, with the sterling regaining some strength against the greenback going into the final days of March, but it could come under pressure this week, should the economic docket cast a weakened outlook for the region. Although the Bank of England kept its current policy unchanged in March, the meeting minutes showed that some member were pushing for more quantitative easing and the central bank could keep the door open to expand its balance sheet further. As markets participants increase bets for more QE, we could see the pair give back the advance from earlier this year.
From a technical point of view, the bears are dragging the sterling down today and they seem to have the wind behind their backs, after the bulls repeatedly failed to break above 1.5913, the 50% Fibonacci level from August high to January’s low, which is a warning that the next move could well be down. The downward trend in RSI on the daily chart instils a bearish outlook for the pair. Technicals paint a bearish picture on the hourly chart as well with the RSI pointing downwards below 50 and the MACD signal line poised to cross below zero. At the moment GBP/USD looks poised to maintain its current range, which gives an opportunity for profit making from short positions all the way down to the key support level by 1.5600 with strong resistance at 1.5935. In the alternative scenario, a break above the 1.59 level, could open the door for a test of the next resistance level by 1.6125.
Daily chart

Hourly chart

Dafni Serdari
Market Analyst
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