GBP/USD rises and challenges key resistance regions at the confluence. EUR/USD gains and a near break of trendline resistance break to the upside could pave the way for a retest of January highs.
Technical evaluation of GBP/USD
The British pound rose on Monday, helped by broad-based US dollar weakness after falling US Treasury yields on bets that the Fed’s tightening cycle is about to end. Against this backdrop, GBP/USD jumped around 0.5% to just below 1.2400. However, it neared confluence resistance at 1.240, a technical limit where the 61.80% Fibonacci retracement from the 2022 crash hit the highs of December last year and January of this year coincide.
The bullish momentum has waned around the 1.240 level several times over the past four months, resulting in a pullback. If history were to repeat itself, a key tenant of technical analysis, recent advances in the cable business could end. This increase means the British Pound could be on the verge of a downward correction in the counting days.
If the bearish scenario materializes, GBP/USD could fall towards 1.2270 before challenging 1.2150, the 50-day simple moving average. In case of further weakness, the next downside target to watch is 1.1960. Conversely, if the confluence resistance at 1.240 breaks with higher volume, the bearish case will be invalidated. This will set the right conditions for a rally towards 1.2680, just below the long-term downtrend line.
Technical evaluation of EUR/USD
The EUR/USD was also higher on Monday. The pair climbed around 0.5% to 1.0890, helped by the weaker tone of the US dollar in the currency area. After a recent rally, the pair cleared cluster resistance at 1.0930. It was a technical high formed from last month’s highs and a nearly two-year downtrend line.
With favorable bullish momentum, the euro could explore in the near term, particularly if market sentiment continues to improve and ECB officials continue to advocate vigorous monetary tightening in response to persistent inflationary pressure in the region.
If broken, EUR/USD rally should accelerate as more buyers enter the market, paving the way for a retest of this year’s high of 1.1033. Even stronger, the next target is the 1.1200 psychological level.
On the other hand, if the sellers regain control and initiate a bearish reversal from current levels, initial support is visible at 1.0730, close to the 50-day moving average.