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GBP/USD Forex Signal: Recovery Rally Has More Room to Run
This relief rally could be part of a break-and-retest approach, meaning that the pair will likely resume the bearish trend.
Bearish View
Bullish View
The GBP/USD price popped on Monday as the risk-on sentiment spread across the financial market. The pair rose from last week’s low of 1.3600 to a high of 1.3724.
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Risk-On Sentiment
The GBP/USD pair tumbled last week as investors reacted to the rising number of COVID-19 cases in key countries like New Zealand, the US, Australia, and China. This decline happened as investors bought the US dollar, which is often viewed as a safe-haven currency.
The situation turned around on Monday as the US Dollar Index tumbled by more than 0.25%. The currency weakened against key currencies like the British pound and Swiss franc. Other risky assets like stocks and commodities jumped, with the Dow Jones jumping by more than 284 points. The S&P 500 and NASDAQ 100 indices rose by more than 1%.
The GBP/USD pair rose as investors reflected on the Flash Manufacturing and Services PMI numbers from the UK and the US. The data showed that the PMIs in the two countries declined slightly in August but they remained substantially above the key level of 50. This is a sign that manufacturers and service providers are doing well in spite of the new COVID wave.
The pair also rose after the strong US existing home sales data. The numbers revealed that the overall existing home sales increased by 2.0% in July to more than 5.99 million. This was a stronger performance from the previous 5.87 million. These numbers showed that the country’s housing market is strong as demand outpaces supply.
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