GBP/USD: weekly prospects
The past week was rather volatile for the British pound. The cable hit a new 5-year low of 1.4565 on Monday, but recovered back above 1.5000 by the end of the week. Pay attention to the bullish engulfing candle formed on a weekly chart. However, there is a strong resistance seen at 1.5150 – this is where the descending trend line lies. We expect the market to reverse from here.
Why did the pound strengthen over the past few days? Broad weakness of the US dollar is the major factor. What’s more, labor market data on Friday brought some optimism: employment keeps on rising, while the jobless rate is on its lowest level since 2008. However, May 7 parliamentary election create a political risk for the currency: there is only 3 weeks left, but no defined leader in a race. As for the economic calendar on the new week, watch the MPC meeting minutes on Wednesday and retail sales data on Friday.