GBP\/USD edged up on Monday, trading around 1.3555 after the British Pound reached its highest level since May 12 as reduced expectations of an imminent Federal Reserve rate hike weighed on the US Dollar. The US Dollar Index (DXY) was near 99.45 after touching 99.30, its lowest level since June 5. Price action has held above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), reinforcing the upward bias as late-July gains extended beyond key moving-average levels.<\/p>\n\n
Momentum indicators remained supportive, with the Relative Strength Index (RSI) at 64.9 and the Moving Average Convergence Divergence (MACD) staying positive. Trend strength also firmed, as the Average Directional Index (ADX) stood at 27.6. Resistance is centred on 1.3600, then 1.3700, with a break above 1.3700 pointing to 1.3850. Support sits at 1.3500, followed by a 1.3417\u20131.3378 zone, while further downside levels include 1.3300 and 1.3150.<\/p>\n\n
With the British Pound showing strong upward momentum against the US Dollar, we recommend derivative traders position themselves for further gains in the coming weeks. We should look to buy call options or enter long futures contracts as the currency pair targets the 1.3600 psychological level. This strategy is backed by the pair holding firmly above its 50-day, 100-day, and 200-day simple moving averages, which confirms a healthy uptrend.<\/p>\n\n
Technical indicators support this bullish stance, with the Relative Strength Index at a strong but not yet overbought 64.9, and the Average Directional Index rising to 27.6. Meanwhile, the US Dollar Index has slipped to around 99.45, weighed down by expectations that the Federal Reserve will continue its rate-cutting cycle. This weakness in the greenback provides a perfect tailwind for us to ride the Pound’s rally toward 1.3700 and potentially the yearly high of 1.3850.<\/p>\n\n
To manage risk effectively, we must establish tight protective measures just below the key support level of 1.3495. A breach below this point would signal that the bullish momentum is fading and require us to exit long positions or buy protective puts. For now, however, the cluster of moving averages between 1.3378 and 1.3417 provides a solid safety net for our bullish trades.<\/p>\n\n
Historically, when the Dollar Index drops below the 100 threshold, as it did recently by touching a low of 99.30, the Pound tends to sustain multi-week rallies. This current trend is further bolstered by recent UK inflation data holding steady near 2.2%, allowing the Bank of England to maintain a more hawkish stance compared to the easing Federal Reserve. We should capitalize on this widening policy divergence by focusing strictly on the long side of the market in the near term.<\/p>\n\n\n\n