The GBP/USD exchange rate bounced back as fears of a wider crisis in the Middle East eased. It rose to a high of 1.3525, up from Monday’s low of 1.3370 as focus shifted to the upcoming Jerome Powell statement.
The GBP/USD exchange rate has been in a strong bullish run in the past few months. It rose above the key resistance level at 1.3500, a few points below the year-to-date high of 1.3630.
The GBP/USD pair rose as investors reacted to last weekend’s decision by Donald Trump to bomb Iranian missile attacks. In a response, Iran launched several missile attacks towards Iran.
Israel also launched missiles targeting a US base in Qatar. Analysts believe that this attack was well choreographed to save face following Trump’s attacks, which explains why US equities rebounded and crude oil prices slumped. Brent, the global benchmark, fell below $70, a day after it surged above $80.
The GBP/USD pair also jumped after Michele Bowman said that she supported an interest rate cut in July, noting that inflation was on its way towards the 2% target. Her statement mirrored that of Christopher Waller, who noted that he supported a cut in July.
These statements come as Donald Trump continues to put pressure on the Federal Reserve to cut interest rates. Trump has warned that high interest rates were costing the US over $1 trillion annually and putting it at a disadvantage compared to other countries.
Therefore, the GBP/USD pair will react to the upcoming statement by Jerome Powell, who will testify in Congress on Tuesday and Wednesday. Signs that he will be open to cutting interest rates will be bullish on the pair.
The daily chart shows that the GBP/USD pair has held steady in the past few months, moving from a low of 1.2100 in January to a high of 1.3525. It has moved above the key support at 1.3435, the upper side of the cup-and-handle pattern.
The pair has moved above the 50-day and 100-day Exponential Moving Averages (EMA). It has also formed a bullish engulfing pattern, a popular continuation signal.
Therefore, the pair will likely continue rising as bulls target the year-to-date high of 1.3630. A drop below the support at 1.3435 will invalidate the bullish outlook.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.
