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GBP/USD price analysis: confluence area close to 1.2650

GBP/USD price analysis: we look for the short-term gains to continue towards previous resistance and the 261.8 per cent extension

GBP/USD price analysis

Market highlights from the past week

Tuesday May 26: in comments on Tuesday, Bank of England chief economist Haldane commented that negative interest rates was a policy option under review

Wednesday May 27: sterling was hampered by underlying budget deficit fears following reports that the deficit would still be 5 per cent of GDP by 2024

Thursday May 28: in comments on Thursday, Bank of England external member Saunders stated that it was safer to ease on the side of easing policy too much and then tighten later if needed

Friday May 29: sterling sentiment remained generally fragile, but month-end demand and firmer risk appetite provided support

Monday June 1: the final UK PMI manufacturing index came in at 40.7, marginally above the flash reading of 40.6, although there was still a sharp contraction in orders while unemployment also continued to decline sharply

GBP/USD price analysis

Let us have a look at the technical viewpoint: 

Monthly: traded to a multi-year low in March of 1.1408. Dip buying can be seen in both April and May with further gains in early June. Resistance is located at 1.2712

Weekly: the Marabuzo support level from the week  of March 23 is located at 1.2060 (the mid-point from the open and the close). Buyers emerged in front of this zone at 1.2075 and subsequent upward pressure broke the sequence of two negative weekly performances. Resistance has been broken at 1.2445

Daily: previous resistance located at 1.2643-46

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Intraday four-hour: a 261.8 per cent extension level is located at 1.2656 (from 1.2077-1.2298). Dips continue to find buyers

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Outlook: we look for the short-term gains to continue towards previous resistance and the 261.8 per cent extension. 

Possible trade set-up: 

Action: buying at 1.2450

Stop: 1.2400

Targets: 1.2640

Potential return on risk to first target:  R3.8 (reward 190/risk 50)

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British Pound / US Dollar
Daily change
1.25445
Low: 1.25131
High: 1.25615
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