GBPUSD top-down analysis
Weekly Analysis
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- GBPUSD has been range bound between 1.1800 and 1.2500 since November 2022 (green parallel lines).
- Late April into May saw cable attempt to breakout (red rectangle). However, this was unsuccessful.
- Nevertheless, cable remains near the upper boundary of the trading range and above the black 30-week EMA.
- The 30-week EMA is heading up.
- The weekly RSI also remains on the bullish side of 50 (blue rectangle), which denotes an underlying bullish momentum.
Daily Analysis
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- Cable has moved out of its bearish channel, between the lower blue and red bands, and into its neutral channel between the blue bands.
- This connotes relative strength.
- Its daily RSI is looking to move above 50 (black ellipse). If successful it will be regarded as a bullish development.
- If it crosses above, the longer the RSI can maintain above 50, the greater the probability of higher prices ahead.
2-Year Note Analysis
Source: www.tradingview.com
- 2-year notes serve as a good proxy for monetary policy.
- The spread between the UK's 2-year gilt and US 2-year yield is moving in an upward sloping channel (green parallel lines).
- The spread's RSI is above 50 and bullish (blue rectangle).
- This suggests a relative hawkishness for the Bank of England over the Federal Reserve.
- The UK's headline inflation rate is higher at 8.7% (compared to the US's 4.9%), so the relative hawkishness has a basis.
- The spread's direction should be supportive of GBPUSD.
Summary
- GBPUSD is above its 30-week EMA and the EMA is bullishly pointing upwards.
- Cable's weekly RSI suggests bullish momentum.
- The daily GBPUSD is showing relative strength.
- The 2-year notes' spread is supportive of GBPUSD.
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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