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GBPUSD
GBPUSD

GBPUSD Bullish Divergence Calls for a Move Back to 1.30

Mircea Vasiu Market Analyst
    Summary:
  • GBPUSD forms a bullish divergence with the RSI on the 4h chart. Coupled with positive fundamentals, a bounce to 1.30 may be in cards.

The GBPUSD pair forms a bullish divergence against the RSI on the 4h chart and eyes a move back to the 1.30. This week’s developments helped the pair reversing some of its recent losses, as Bank of England’s Governor softened the negative rates remark and the PMIs printed above the 50 level.

Governor Bailey Downplaying Negative Interest Rates

One of the reasons why the GBPUSD pair lost ground recently came from the Bank of England (BOE). Last week’s remarks that the bank is actively studying negative rates in the kingdom has put pressure on the pound.

As it fell through the 1.30 level, the GBP found little or no support. But then this week, right at the start of it, Governor Bailey held a speech and said that it is not warranted that the BOE will introduce negative rates anytime soon, giving the pound a bit of a relief.

PMIs Remain Above 50

Both manufacturing and services PMIs remained above the 50 level, an encouraging sign for the United Kingdom’s economy. In comparison, the Eurozone PMI services for the previous month dropped below 47, pointing to yet another contraction for the sector.

However, that is not the case in the United Kingdom, offering another fundamental support for the pound.

GBPUSD Technical Analysis

The GBPUSD rose sharply from March lows. It reached 1.35 at the start of this month, before retracing below the 1.30. Speaking of the 1.30, it likely remains pivotal for the months ahead until Brexit negotiations end.

On its way to the downside, the GBPUSD formed a bullish divergence with the RSI. While not a reversal sign per se, it comes to reinforce a potential bullish scenario.

Bulls that may want to take a chance on the long side should wait for the GBPUSD to move above 1.2850 before buying. This way, the divergence is confirmed. For the take profit, bulls may use the 1.30 while having a stop loss at 1.2740.

GBPUSD Price Forecast

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