Charts Of The Day: GBP rally picks up momentum

Market Analysis / 4 Min Read
Milan Cutkovic / 10 May 2021

Highlights:

  • Political risks weigh on the British Pound, but the rally is picking up momentum
  • Rising risk appetite reduces the Yen’s traditional safe-haven appeal
  • Emerging markets currencies benefit from the Dollar´s slump
  • Copper starts to look stretched, despite strong fundamentals supporting the rally

GBP/USD

Political risks have been weighing on the British Pound in the past few days, but the rally is picking up momentum as traders start to focus on strong economic growth and a successful vaccination campaign that should keep the UK economy on a steady path to recovery.

GBP/USD recently broke above the falling trendline resistance from the February high. A test of 1.4180 resistance seems imminent, after which GBP bulls will be eyeing the February high at 1.4237. To the downside, support is seen at 1.3970/80. The key support zone traders will be watching lies between 1.38 and 1.3840; as long as GBP/USD can hold itself above 1.38, there is a solid chance for a continuation of the rally.

GBP/JPY

Rising risk appetite is making the Japanese Yen – a traditional safe-haven – less appealing, and therefore the GBP/JPY is another currency pair to keep an eye on. It is currently advancing towards the 152.50 resistance level, which is also the 78.6% Fibonacci of the April sell-off. If GBP/JPY clears this hurdle, a test of the April high at 153.40 should follow fairly quickly. 

USD/ZAR

Emerging markets currencies have benefited from the Dollar´s slump on Friday. USD/ZAR – which has been in a steady downtrend for over a year now – broke below another major support level at $14.15. Despite the ZAR rally looking slightly stretched, the Daily RSI is not signaling oversold conditions in USD/ZAR and there are no signs of a potential reversal yet. Traders will now be looking at 13.81 for support, while the topside will likely stay capped at 14.26 in the near-term.

Copper

The Copper rally is starting to look stretched, despite strong fundamentals supporting the rally. The metal has reached an all-time high recently, as traders continue to bet on a strong recovery in major industrial economies. US President Biden´s $2 trillion infrastructure plan was another significant boost for base metals. However, decreasing demand in China is a warning sign that the rally might have gone too far.

The RSI is hinting at heavily overbought conditions on both the hourly and the daily chart. Traders will be looking at 4.7270 for support, followed by the rising trendline from the May low and 4.6550. Following Copper's parabolic rise, a pullback would not be a bad thing. 

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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