The GBP/USD pair continued to strengthen during the previous trading week, which has been happening for the third week in a row. However, there some quite important nuances that appeared just like in the EUR/USD pair. This will clearly be discussed in the technical part of the review today. In the meantime, we can note last week's key event, which was the FOMC minutes of the US Federal Reserve System (FRS). Perhaps, the primary attention of market participants in the FOMC minutes was drawn to the topic of increased inflation, which almost all Fed leaders consider a temporary phenomenon. This is due to the recovery of the world's leading economy from the consequences of the COVID-19 pandemic, which led to a sharp increase in producer prices.
Given this, the leaders of the Federal Reserve did not rule out a reduction in the volume of the quantitative easing program – QE. However, there are no clear signals that this would certainly happen. Nevertheless, this factor provided support to the US dollar, which was not very significant. In turn, the data received last week from the UK on unemployment and consumer prices showed once again that Britain's economy is recovering quite actively, which is facilitated by the successful vaccination company from COVID-19.
Now, let's look at the weekly chart of the pound/dollar pair.
Weekly TF:
As already noted at the beginning of the article, the GBP/USD pair showed an increase of 0.48% during the last five-day trading session. In fact, the pound showed the greatest strengthening against the US dollar among all the major currencies. However, it's time to pay attention to an important technical point, which was mentioned at the beginning of the article. After reaching sellers' key resistance level located at 1.4231, the pair retreated and closed the previous week at 1.4145, leaving a quite impressive upper shadow. There is no doubt that this factor indicates the strength of resistance in the area of 1.4230, as well as the fact that the market does not yet dare to trade on the pair above this important level.
Currently, the pound bulls have no choice but to break through this level and close the week higher. In this case, the last bullish candle with a long upper shadow will not pose any threats to the further movement of the course in the upward direction. The next bullish target will be the level of 1.4375, where the maximum values from 2018 were shown.
In turn, the bears should lower the trajectory first below the red line of the Ichimoku Tenkan indicator, which is near the strong technical level of 1.3950. Before this, it is necessary to transfer trading under the important psychological and technical level of 1.4000. It can be recalled that the area of 1.4000-1.4015 provided strong resistance to the pair for a long time and did not let it go higher. Now, the same price area can act as strong support. Judging by the weekly time frame, these are the options for the price movement of the GBP/USD pair.
Now, let's move on to the smaller time frame.
Daily TF:
Last Friday, the US dollar strengthened across the entire market, driven by stronger US manufacturing reports. It was the pair's decline that Friday that led to the appearance of such a significant shadow at the last weekly candlestick. In addition, the minutes of the FOMC meeting from April 27-28 remain hopeful that the Fed can still reduce stimulus by reducing the purchase of Treasury and mortgage bonds, the monthly volume of which currently stands at $ 120 billion. From the point of view of technical analysis, we can note the red line of the Tenkan Ichimoku indicator, which is actively showing upward movement, can be noted. This provides the pair with tangible support.
If we talk about the levels, then the level of 1.4000 is certainly already indicated. The daily chart shows that this level has changed its previous function of resistance and has now become strong support, as can be seen from the Doji candle for May 13. However, the nearest support of this instrument is around the range 1.4120-1.4100. Hence, it is suggested to consider the nearest opening of long positions.
I recommend looking for lower and more favorable prices for purchases in the price zone 1.4070-1.4050. The last option for opening buy deals is the price area of 1.4020-1.4000. At this stage, a corrective pullback to the targets outlined above is not excluded. If the pair tries to resume growth from current prices but gets stuck in the area of 1.4200-1.4230, while forming bearish candlestick analysis patterns in the smaller period, this will be a signal for opening sales. The target for which is better to set in the calculation of the course adjustment.
