GBPUSD had previously been trading inside a range with support at 1.2100 and resistance at 1.2700. Just recently, price made an upside breakout, signaling that further gains are likely. The rectangle is 600 pips tall so the resulting uptrend could be of the same size.
In addition, a bullish flag appears to have formed, also serving as a continuation signal. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, and the gap between the moving averages is widening to reflect stronger buying pressure.
Stochastic has been on the move down but is turning higher once more to indicate a return in bullish momentum. Still, a pullback to the broken range resistance around 1.2700 could be possible before price resumes its climb.
The French elections over the weekend left Macron and Le Pen as frontrunners for the next set of polls in May, allowing European pairs to stage a relief rally on hopes that Macron could take the lead. Meanwhile, the recently announced UK snap elections has been positive for the British currency on hopes of a new Brexit strategy.
There are no major reports due from the UK today while the US has a speech by dovish member Kashkari. Later on in the week, both the UK and the US will print their preliminary Q1 2017 GDP readings.
By Kate Curtis from Trader’s Way