Yahoo Finance GBP/USD Daily Forecast – Downturn Gains Momentum as Dollar Index Breaks to 21-Month High
After another failed attempt at 1.3050 resistance this week, GBP/USD has reversed lower and is on the verge of breaking to lows not seen since late November.
The dollar continued to gain against its major counterparts with the dollar index (DXY) breaking to fresh highs not seen since May 2017.
Retail sales out of the UK came in better than expected, rising 0.9% in January. The positive upside surprise followed three consecutive monthly declines in UK sales. The Office for National Statistics attributed the rebound mainly to growth in sales for food stores and non-food stores.
While GBP/USD has fallen under pressure once again, the positive data stands to underpin the exchange rate. In this context, traders looking to take advantage of a stronger dollar might look to other currency pairs.
Equity markets have rebounded and a rally in the FTSE 100 yesterday served to wipe out the sharp loss from Tuesday. The price action signals a bullish reversal and buyers are likely to keep the UK index bought on dips.
Technical Analysis
GBP/USD has fallen below the 1.2900 handle which signals weakness. However, the pair managed to bounce higher from this same area earlier in the month which should keep bears on guard.
Where the pair closes by the end of the day will be important. A sustained drop below the 1.2900 handle could lead to a further decline towards the 1.2788 area.
On a daily chart, GBP/USD has fallen below its 100-day moving average. This same indicator had held the pair higher earlier this month to trigger a nearly 1.5% rally.
Several other currencies have come under renewed pressure in the second half of the week as the dollar continues to dominate the major currencies. The Japanese yen and antipodean currencies have broken to notable lows over the last 24-hours weighed by a combination of a stronger dollar and a rebound in risk appetite.
Bottom Line
GBP/USD has reversed back into a bearish trend, despite positive data this week, after a recovery was capped at 1.3050 resistance.
The dollar index extended gains to fresh highs not seen since May 2017.
This article was originally posted on FX Empire
