GBP/USD posts fresh 7-month highs above 1.29

The GBP/USD pair caught some fresh bids in the US afternoon and leaped to a new 7-month high at 1.2965. Earlier in the session, the pair retraced back towards 1.29 and found support around that level. As of writing, the pair was trading at 1.2955, up 0.4% on the day.

A broad-based cable strength coupled with a stationary US Dollar Index allowed the pair to add on to its daily gains before the week comes to an end. Following another weak test of the 99 level, the DXY lost momentum and has been spending the last few hours in a very slim range around 98.90. The fact that there were no fundamental catalysts seen behind that recent upsurge suggests that month-end flows might also be supporting that move.

• US Dollar Index posts lowest monthly close since October

The pair was able to gain nearly 600 pips in April as it recorded strong weekly gains in the last three weeks in a row. The main reason behind this strong performance is the announcement of the snap election in the UK, as it heightened the expectations that the Brexit process would be finalized in a faster and smoother way than initially anticipated. When PM May announced the decision on April 18, she highlighted that Britain was in need of certainty, stability and strong leadership following the EU referendum.

Technical outlook

The RSI on the daily graph shows overbought conditions above 70 mark and a technical correction could be seen before another bullish attempt. The next resistance for the pair aligns at 1.30 (psychological level) ahead of 1.3060 (Sept. 28 high) and 1.3120 (Sept. 22 high). On the flip side, supports are located at 1.2900 (psychological level), 1.2840 (Apr. 27 low) and 1.2760 (Apr. 21 low).

• GBP/USD still looks overbought – UOB