GBP/USD: more growth ahead?
British pound pushed higher on the new week, breaking above the neckline of an inverse “head-and-shoulders” formation. The pair reached the next strong resistance at 1.4670 by Friday (this is the February 2016 high). A short-term bearish correction is likely from here, but in the medium term the pair is expected to extend the upside towards the 1.5000 mark. We maintain a buy-on-rallies strategy.
The fundamental picture creates space for more rallies in GBP/USD. The Fed remains dovish and, as a result, the US Dollar growth is limited. Brexit fears are not influencing the market these days as politicians all over the world are trying to persuade the British people to stay in the EU. Be careful, though: pressure on the pound is expected to return at the end of May. The Brexit referendum will take place on June 23.
On the new week UK is scheduled to release a bag of April Purchasing Managers' Indices. You should watch the Manufacturing PMI on Tuesday, Construction PMI on Wednesday and Services PMI on Thursday. Note that banks in Great Britain will be closed for a holiday on Monday.