The rise in crude oil prices at the beginning of this week's trading led to a return to the US dollar's gains, but if the rise proves to be temporary, the correction in the GBP/USD exchange rate could extend. It rebounded to the 1.2261 resistance level at the end of last week before stabilizing. The pair is down around the 1.2170 level at the beginning of this exciting week’s trading.
In general, global markets were in decline at the beginning of the new week's trading due to the growing geopolitical concerns that focused on the Middle East in the wake of the attacks launched by Hamas over the weekend on Israel. The arc of concern goes back to Iran - which has long been a sponsor of Hamas - and which remains the main supplier of oil to global markets. According to analysts, the attacks in Israel have led to a rise in oil prices, as investors evaluate the possibility that the conflict will disrupt supplies in the Middle East, if other countries are drawn into it. With the Israeli government warning of a long and difficult war, there are fears that deep and continuing retaliatory strikes on Gaza could lead to Iran being drawn into the conflict and have an impact on the flow of energy in the region.
A rise in the price of crude oil may lead to inflation and could affect global growth expectations, which in turn leads to a strengthening of the dollar, which is considered a safe haven currency. It is very difficult to make predictions based on geopolitics, but if Iran can maintain a low level of interest over the coming days, the spike in the dollar and oil may be short-lived.
- The technical picture for the GBP/USD exchange rate has improved due to the small gains achieved last week, which effectively stopped an impressive series of losses.
- Analysts expect this technical improvement to extend over the coming days, and Thursday's UK GDP release and US inflation numbers may boost expectations for the pound.
- In this regard, Sean Osborne, senior forex analyst at Scotiabank, says that the short-term readings are bullish for the pound sterling against the dollar according to the strong recovery from the mid-week low and via a major bullish reversal of a large signal outside the range.
Depending on the performance of the Forex market. The GBP/USD exchange rate hit a low of 1.2037 in the middle of last week before rising for three consecutive days to reach a high of 1.2219, a move made all the more impressive by the recovery from Friday's sell-off that followed. Impressive jobs report from the US.
In general, it should be emphasized that the bullish setup here is short-term in nature and covers a time frame from hours to a few days. The overall picture remains weak due to the strength of the US dollar. The dollar rose amid a rise in long-term US bond yields and weak market sentiment, all linked to the view that the Federal Reserve will be asked to keep US interest rates at high levels for an extended period. But this trade can be triggered again at any time and any bullish GBP/USD event should be viewed as a profit taking event in the opposite direction which is required to rebalance the market from previously extended positions.
Sterling forecast against the dollar today:
According to the performance on the daily chart below, the upward rebound for the GBP/USD currency pair is still cautious. Its gains may remain in a selling position in the coming days, especially if the US inflation numbers and the content of the minutes of the last meeting of the US Federal Reserve Bank come in support of further tightening of monetary policy. In addition, if global geopolitical tensions increase, the US dollar may remain preferable to investors as a safe haven. The nearest targets for bulls are currently 1.2255 and 1.2330, respectively. On the other hand, the bears in the currency pair return to the support area of 1.2120, ending the current upward aspirations. The currency pair is not awaiting important and influential data today.
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