GBP/USD Price Analysis: 21DMA guards the downside at the start of the week
- GBP/USD rises for the first time in three straight days on Monday.
- Broad US Dollar weakness underpins Cable despite Fed-BoE policy divergence.
- Pound Sterling bulls stay hopeful while above 21DMA, looks to 1.2200.
GBP/USD is consolidating the rebound below the 1.2200 threshold, as bulls trade with caution amid a downbeat market mood at the start of the week on Monday.
Broad-based US Dollar weakness is underpinning the uptick in the Pound Sterling, despite the continued widening policy divergence between the US Federal Reserve (Fed) and the Bank of England (BoE). The slide in the USD/JPY pair is exerting bearish pressure on the US Dollar, as investors pay little heed to the higher Treasury bond yields.
From a short-term technical perspective, the bullish 21-Daily Moving Average (DMA) at 1.2146 continues to offer support to GBP bulls, despite the rising wedge breakdown confirmed last week.
The upside appears more compelling for Cable, as the 14-day Relative Strength Index (RSI) inches higher above the midline.
Meanwhile, the double Bull Cross confirmation, with the 21DMA cutting the 200DMA from below and the 50DMA piercing the 100DMA for the upside, also adds credence to the rebound.
On the upside, GBP buyers need to recapture the 1.2200 barrier to extend the recovery toward Friday’s high at 1.2223, above which a fresh advance toward the wedge support-turned-resistance at 1.2424 will be on the cards. The six-month high at 1.2446 will be next on buyers’ radars.
GBP/USD: Daily chart
On the flip side, failure to defend the 21DMA on a daily closing basis will put the descending 200DMA at 1.2096 under threat.
A sustained break below the latter will initiate a fresh downswing toward the bullish 50DMA at 1.1755.
GBP/USD: Additional technical levels