How Much Further Can The Rally In The British Pound Go?

 | Feb 22, 2021 10:03

Welcome to a new trading week.

Positive market sentiment continued as investors took comfort from positive news on vaccine efficacy. In Israel, the Pfizer Inc. (NYSE:PFE) and BioNTech SE (NASDAQ:BNTX) Covid-19 shot appeared to stop the vast majority of recipients from infection. The anti-risk U.S. dollar turned lower amid optimism about the global recovery. GBP/USD extended its gains until a high of 1.4052 despite its overbought trading levels. EUR/USD traded steady between 1.21 and 1.2150.
 
This week investors will be monitoring Federal Reserve Chair Jerome Powell’s testimony on Tuesday. Powell is likely to emphasize a dovish message to Congress in his testimony, stressing that now is not the time to talk about normalizing policy.

With the economic outlook brightening, nervousness about inflation is percolating. The Fed Chair could however soothe inflation concerns, acknowledging that inflation could rise but the Fed seems poised to look through any uptick in the near-term.

h2 GBP/USD- How much further can the rally go?    /h2

The pound traded on a high note as the nearing reopening of the U.K. economy provides a tailwind for the currency. While the risk of pullbacks remains amid overbought territory, the overall uptrend could favour higher targets at 1.42 and 1.4330.  If the pound is able to stabilize above the 1.4050-barrier, we will focus on a higher target at 1.4170. For bearish momentum to accelerate we will need to see a break below 1.39. A crucial support is still seen at around 1.3750.