GBP/USD, stuck within a tight range of 1.36412-1.34921 since 10 February, is ripe for a breakout. The 200-pip question is in what direction. A lot will depend on how the outlook on monetary policy on both sides of the Atlantic shifts in the coming months.
Technically, the odds looked stacked against a break to the upside. The downtrend in GBP/USD started in the summer of last year has yet to be invalidated. Furthermore, the pairs recent tight range points to a further continuation of the pervious trend.
Still, price continues to tightly hug the 200-day exponential moving average and recent momentum has been biased to the upside. In other words, a break to the upside of its recent range certainly can’t be ruled out.
Meanwhile, the 78.6% Fibonacci retracement from the October swing high to the December swing low of 1.36872 could act as an impediment to further gains in the pair. In addition, 1.37493 is likely to act as a further ceiling on any future ascent. In terms of downside, 1.33646 may provide further support, before more substantial selling were to come on board.
