Economists at Credit Suisse discuss GBP outlook and expect Cable to extend its gains.
Break below support at 1.2344 to warn of a deeper setback
“We still see scope for one final leg higher to our core target at 1.2668/1.2758 – the May 2022 high, 61.8% retracement of the 2021/2022 fall and long-term downtrend from May 2021. Our bias would then be to look for an important top here.”
“Below support at 1.2344 stays seen needed to mark a minor top to warn of a deeper setback to the 55-DMA and price support at 1.2255/1.2190, but with this ideally holding.”
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The British Pound against the US dollar has posted an impressive upside over the last week, although the pair needed several attempts to break through the key resistance at 1.2668/1.2758. According to experts from Credit Suisse, an eventual final leg is still expected in the exchange rate on its way to the mentioned resistance.
In its technical analysis report, Credit Suisse explained that the exchange rate is contained in a bullish channel since the early April. The analysts noted that the exchange rate bounced off the lower support of this channel during the last week and broke through the SMA20 resistance at 1.2550. Based on the closed daily candlestick, the upward momentum is likely to continue towards the 1.2668/1.2758 resistance.
The bullish impulse was expected to continue but with technical indicators signalling a potential price exhaustion, Credit Suisse believes that an eventual leg higher would most likely be a final leg before an eventual correction lower. The exact behaviour of the correction is harder to predict since several resistance levels have been broken, but there should be some signs of exhaustion in place before the eventual downturn.
Overall, Credit Suisse recommends that traders should be extra cautious with their entries and closely follow the direction of the GBP/USD exchange rate and any price exhaustion signs at the 1.2668/1.2758 resistance. End of day close above the mentioned resistance is required to confirm the continuation of the bullish trend.
Stay tuned for further updates.