Cable Clears Key Resistance On Closing Basis

On Friday we noted that “a number of positive technical factors could be emerging for GBP, and a bottoming out of negative news flow could result in a positive conclusion to the current consolidation phase.”

• Subsequent price action has seen GBP/USD breach $1.2500 (registering a near 10-month high at $1.2525 in the process), with a close just above that figure on Tuesday. Crucially, the move cleared key resistance in the form of the Jan 23 high ($1.2448).
• Tuesday’s break and close above key resistance signals the next stage of the technical uptrend that started on Sep 26 ‘22. The focus is on a climb towards $1.2555 next, the top of a MA envelope study.
• Longer term, $1.4000 is the next major resistance level.
• Citi’s FX technical team has added a long GBP/USD position because of the recent price action (they also noted “positioning suggests more room to add”), while there were several indications that Tuesday’s move took place on comfortably above average volume, even as participants eye the Easter break (giving it greater credence).
• While GBP/USD’s April seasonals have become more mixed in recent years, there is clearly still some recognition of the pair’s longer term historical pattern of strengthening during the month. Bank of America attribute this historical theme to dividend payment season & related repatriation of offshore revenues on the part of FTSE companies. They also note that “a less observable factor may be connected to the turn in the UK tax year.”