GBPUSD is putting the finishing touches on a stellar week. After dipping to 1.4860 on Tuesday, the pair has been on an absolute tear, rising a full 300 pips to trade at 1.5155 as of writing. In fact, the pair has traded higher 9 of the last 10 days and is up an incredible 600 pips over that period. As we noted on Wednesday, the latest fundamental catalyst for the bulls was the release of more-hawkish-than-expected minutes from the BOE’s April 9th meeting. With signs suggesting that a few members of the Monetary Policy Committee may soon support rate hikes while the prospects for a Federal Reserve rate increase fading more toward Q4 than Q3, it’s no surprise that GBPUSD has been on such a tear.
At this point, the momentum is firmly on the bulls’ side, but there are some technical signs that the pair may be due for a pause heading into early next week. The unit is now testing the 61.8% Fibonacci retracement of its March/April drop at 1.5175; this level also represents previous resistance from mid-March. In addition, the Slow Stochastics indicator is now solidly in overbought territory (>80), suggesting that the rally may be getting a bit overheated.
That said, a break above resistance at 1.5175 would indicate that the momentum is stronger than any concerns about the overbought conditions. In that case, GBPUSD could target the 78.6% Fibonacci retracement at 1.5340 next. Meanwhile, even if we do see a dip early next week, traders may look at any moves back toward key previous-resistance-turned-support at 1.50 as an opportunity to join strong uptrend at value.
Key Economic Data / News that May Drive GBPUSD Next Week (all times GMT):