The British pound rose on Monday due to the weakened U.S. dollar and falling U.S. Treasury yields, with GBP/USD increasing by 0.5% and approaching the technical barrier of confluence resistance at 1.2450. 

This level coincides with the 61.80% Fib retracement of the 2022 slump and the highs of December and January. 


However, the daily chart shows that bullish momentum tends to fade around 1.2450, leading to pullbacks in the past four months. Thus, there is a possibility that cable’s recent advance may be running out of steam and could experience a downside correction in the near future. 

If this scenario plays out, GBP/USD could drop to 1.2270 and then 1.2150, the 50-day simple moving average. 

The next downside target is 1.1960. But, if the confluence resistance at 1.2450 is breached on higher volume, the bearish case would be invalidated, and a rally towards 1.2680 would be expected.


Similarly, EUR/USD rallied on Monday, up by 0.5% to 1.0890, backed by the softer tone of the U.S. dollar. The pair is now approaching the technical ceiling of cluster resistance at 1.0930, created by last month’s highs and a descending trendline that has been in play for almost two years. 


The euro may be positioned for a topside breakout if market sentiment improves and ECB officials continue to support forceful monetary policy tightening in response to inflationary pressures in the region. If there is a bullish breakout, EUR/USD’s gains are likely to accelerate, leading to a retest of this year’s high at 1.1033. 

On further strength, the psychological mark of 1.1200 is the next upside target. However, if sellers take control and trigger a bearish reversal, initial support lies at 1.0730, close to the 50-day simple moving average. 

The next support level is at 1.0620, created by a short-term rising trendline in play since September 2022.


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