GBP/USD Technical Analysis: Why 1.4040 Is The Level To Watch

In recent days, the cable has been one of the best performing currency pairs. It has risen from a low of 1.3700 in early March to a high of 1.4400 yesterday. The surge the pair has experienced can be attributed to several factors. First, there seems to be progress in the Brexit negotiations, inflation, the threats of a trade war, and the positive economic data from the UK.

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After such an impressive rally, the question among analysts is whether the pair will continue the upward trajectory or whether a reversal could be coming.

From a long-term perspective, the movements of the pair will depend on the economy of the two countries and the strategies the Fed and the BOE decide to apply on a monetary perspective. Today, the pair may move after the ONS releases the UK’s CPI data. Markets expect the MoM CPI to grow at 0.3%, down from last month’s 0.4% and the annualized rate to remain unchanged at 2.7%. On the short term however, the movements may depend on the technical.

As shown below, the pair’s rise has made it complete the impulse phase of the Elliot Wave. Therefore, in the short term, markets may expect the pair to start a corrective wave which could see it test the important 50% Fibonacci Retracement level at 1.4040.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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