GBPUSD is currently trading in an uptrend, as a rising channel can be drawn on its 1-hour forex chart. At the moment, the pair is approaching the channel resistance while stochastic is indicating that pound bulls are in control of price action.
This suggests that the pair could test resistance at the 1.5500 major psychological level around the top of the channel. If this holds as a ceiling for the current climb, GBPUSD could head back south to the bottom of the channel around the 1.5350-1.5400 levels.
Fed Chairperson Janet Yellen’s latest speech sparked a sudden dollar selloff, as traders priced in lower odds of a Fed rate hike in June. Yellen clarified that they would change their forward guidance as soon as they are more inclined to hike interest rates, and their latest statement suggests that they are not likely to do so in the next couple of meetings.
Meanwhile, the UK Inflation Report hearings added support for the British currency, as officials assured that the drop in price levels might translate to stronger spending and growth. This suggests that GBPUSD could be in for more gains in the coming days, especially if US data miss expectations.
BOE Governor Carney and Fed Chairperson Yellen are set to make speeches again today and this might renew GBPUSD’s climb. An upside break from the channel resistance could mean longer-term gains for the pair.
However, a short-term countertrend play might still work out, as 1.5500 lines up with a key area of interest. Short orders might be located around this region, as buyers might also book profits right here. Shorting at 1.5500 with a tight stop around 1.5600-1.5650 and a target of 1.5350 could offer a good return-on-risk for a day trade.
By Kate Curtis from Trader’s Way