USD/JPY Holds Steady Amid Rising Yields, Support Builds for Further Gains – 2024-09-23

GBP/USD extended its upward momentum, reaching a new 2024 high of 1.3341, driven by a combination of solid fundamentals and bullish technical signals. The unexpectedly strong rise in UK retail sales added to hawkish Bank of England (BoE) rate expectations, contrasting with the more dovish Federal Reserve, which recently implemented a 50 basis point rate cut. This divergence in monetary policy between the two central banks has created a favorable backdrop for GBP/USD, as traders anticipate further divergence in the UK-U.S. rate paths through the remainder of 2024 and into 2025. As the BoE is likely to maintain a more hawkish stance, the pound is set to benefit from this environment, potentially pushing GBP/USD toward key resistance levels above 1.34.

From a technical perspective, GBP/USD has established a clear bullish trend, characterized by a series of higher highs and higher lows since rebounding from the Fibonacci support level near 1.30 on September 11. This upward trajectory is further reinforced by strong futures positioning, with sterling net longs increasing to 90k contracts by mid-September, following a dip in August. The resurgence of long positions signals renewed investor confidence in the pound, supported by favorable economic data and market expectations for continued rate hikes from the BoE. Key technical resistance levels to watch include the February 27, 2022 weekly high of 1.3437 and the February 6 weekly high of 1.3643. On the downside, immediate support lies at 1.3269, the low of Friday’s range, with additional support at 1.3229, the 100-day moving average, and 1.3172, the 50% Fibonacci retracement of the 1.3003-1.3341 move.

Looking ahead, GBP/USD appears well-positioned to continue its ascent, particularly as the UK economy remains resilient and inflation pressures persist, forcing the BoE to maintain a restrictive policy. With the U.S. Federal Reserve likely pausing or easing further, the relative attractiveness of sterling compared to the dollar could drive GBP/USD higher, potentially targeting the upper boundary of the 21-day Bollinger Band at 1.3366, followed by the key resistance near 1.3437. However, any downside moves should be carefully monitored, especially if UK economic data disappoints or global risk sentiment turns, which could test the key support levels mentioned.