Hot forecast for GBP/USD on 02/05/2023
June 2, 2023 8:25 amVideo
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Yesterday, the pound showed impressive growth. Similarly, the euro also showed significant gains. Considering that there was no macro data from the UK, unlike the eurozone, it is more accurate to say that the pound followed the euro. However, this growth contradicted all the macro data. After all, eurozone inflation slowed down significantly more than expected, while employment in the United States increased substantially more than anticipated. So, the dollar should have extended its growth. But the market went in a different direction, and the formal reason for this was the minutes of the European Central Bank’s governing council meeting, which mentioned the possibility of more interest rate hikes.
However, the meeting itself took place before there were even rough forecasts for the current inflation. Just a couple of days ago, several ECB officials explicitly stated that the cycle of interest rate hikes may have come to an end. So, the rise of the euro and, along with it, the pound, goes against common sense. Unless we consider the excessive overbought condition of the dollar, which became the main reason why European currencies increased.
However, there is a high probability that today everything will return to the values at the start of yesterday’s trading. Employment data clearly suggests that the content of the US Department of Labor report will be slightly better than expected. In particular, unemployment, which was expected to increase from 3.4% to 3.5%, may well remain unchanged. But if unemployment does increase, the dollar may continue to lose its positions, primarily due to the persistent overbought condition.
During the intense upward movement, the GBP/USD pair jumped above the 1.2500 level. This served as the primary signal of the pound’s recovery process relative to the recent corrective move.
Due to the sharp price change, on the four-hour chart, the RSI reached the overbought zone, which indicates that long positions are overheated in the intraday period.
On the four-hour period, the Alligator’s MAs are headed upwards. This indicates a shift in trading interests.
Outlook
In this situation, the sharp price change from the day before is a signal of the pound’s overbought conditions in the intraday and short-term periods. The target level is set at 1.2550, around which the upward cycle slowed down, which reduced the volume of long positions and resulted in a stagnation. We can assume that the process of the pound’s recovery will be temporarily interrupted by a pullback. However, if the price remains stable above 1.2550, speculators may ignore the technical signal of overbought conditions. In this case, the pair can rise towards the peak of the medium-term trend.
The complex indicator analysis unveiled that in the short-term and intraday periods, points to the pound’ recovery process.
The material has been provided by InstaForex Company – www.instaforex.com
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