GBP/USD Weekly Forecast: GBP/USD Eyes Yearly Peak, EUR/GBP Holds Range
16 May 2021
The backdrop for the Pound remains favourable as highlighted by the better than expected GDP report. While PM Johnson sticking to his plan to unwind lockdown measures as previously scheduled, despite rising concerns over the Indian Covid variant has seen the market take a “buy the dip” approach in Cable with the 1.40 handle being the key pivot. On the technical front, with dips finding support from 1.40., holding above the 100DMA also keeps risks tilted to the upside in the medium term. Alongside this, positioning is somewhat cleaner for bulls to re-emerge given the recent unwind of net longs by fast money accounts (leveraged funds) ahead of the BoE and Scottish Election.
GBP/USD Chart: Daily Time Frame
EUR/GBP: Despite the strong performance in the Pound, EUR/GBP has maintained its well-defined range. Topside resistance at 0.8730 remains firm and tests below 0.8600 have been somewhat short-lived. That said, the continued rangebound price action is likely to persist in the short term, given that the greenback has been the main driver in G10 FX as opposed to idiosyncratic factors. Therefore, the bias would be to fade the range bottom and tops.