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GBP in Focus: Technical Projections for Q2 Against Major Currencies

GBP Q2 Against Major Currencies
British pound coins are seen in this illustration taken, November 9, 2021. REUTERS/Dado Ruvic/Illustration

GBP sees volatility post-BoE shift. Technical outlooks against major currencies for GBP/USD, EUR/GBP, and GBP/JPY analyzed for Q2.

The British Pound has embarked on a trajectory of readjustment against major currencies following a notable shift in tone from the Bank of England. In anticipation of the March meeting, market analysts had positioned the UK’s first rate hike in mid-Q3, reflecting these expectations in the pricing of Sterling pairs. However, a surprising forward shift to the June MPC meeting has precipitated a decline in the value of Sterling, a trend expected to persist in the short term. Looking ahead, stability is forecasted against the US dollar and the Euro, while the dynamics against the Japanese Yen will hinge upon decisions by the Bank of Japan.

GBP/USD Q2 Technical Outlook

The GBP/USD pair reentered a prolonged consolidation phase in November of the previous year. Despite a brief surge to 1.2900, the subsequent retracement saw Cable slip below 1.2600 following the BoE’s rate adjustment. Key technical markers around 1.2600 include the 38.2% Fibonacci retracement at 1.2628 and the 200-day simple moving average at 1.2591, underscoring pivotal levels as GBP/USD seeks equilibrium. Further downside movement could encounter support around 1.2500, followed by the 50% Fib retracement at 1.2470, with a breach potentially pressuring levels below 1.24. On the other hand, we anticipate resistance within the range of 1.2742 to 1.2825, with the current trading zone expected to remain stable over the coming months.

GBP in Focus: Technical Projections for Q2 Against Major Currencies

EUR/GBP Q2 Technical Outlook

EUR/GBP has operated within a defined range throughout the first quarter, with 0.8500 as steadfast support and facilitating robust rebounds during two tests. Concurrently, the 0.8550 region has witnessed fluctuating highs and lows. Recent Sterling weakness has prompted the breach of multi-month resistance, with the 200-day SMA at 0.8606 and prior highs around 0.8620 poised for scrutiny. While an upward move above 0.8620 appears plausible, the market’s extreme overbought condition, as the CCI indicates, suggests an imminent consolidation phase. Although an upward trajectory, substantial gains beyond 0.8700 may face resistance. Anticipation is that EUR/GBP will ascend in Q2, albeit moderately.

GBP/JPY Q2 Technical Outlook

In contrast to GBP/USD and EUR/GBP, GBP/JPY’s technical outlook portends potentially heightened volatility in the forthcoming weeks. Since the onset of 2023, GBP/JPY has sustained a robust uptrend fueled by persistent Yen weakness and intermittent Sterling strength. However, this trend may face headwinds as the BoE contemplates lower rates amidst the Bank of Japan’s marginal interest rate hike. Currently, GBP/JPY maintains an upward trajectory, characterized by successive higher lows and highs, with all three simple moving averages favoring the pair. An adverse turn necessitates a breach below the recent higher low at 188, targeting the mid-186 area and 184.

The prevailing technical outlook underscores the intricate interplay of market dynamics and central bank policies shaping the trajectory of the British Pound against its major counterparts.

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