05.07.202112:01 Forex Analysis & Reviews: Magnetic Pound: GBP attracts investors. Forecast grid

Recently, the British currency has attracted active interest from most investors. Experts believe that the reasons for this popularity are fatigue from the excessive volatility of the dollar and the relatively stable geopolitical situation in the UK.

Despite the active build-up of long positions in USD, the dollar cannot boast of stability. This is hindered by conflicting US macroeconomic data released last week. According to analysts, the dollar will receive an additional growth impulse if market players increase the number of long positions in USD. Against this background, the GBP looks advantageous, since it is now in the focus of investors' attention.

The growing interest in the British currency is due to the expectation of successful results of mass vaccinations in the UK. According to experts, the current situation with the spread of COVID-19 and its new strain remains tense. According to Prime Minister Boris Johnson, in the near future, the British authorities will determine the scope of the fourth stage to ease restrictions. Last week, Sajid Javid, UK Minister of Health, noted that coronavirus restrictions would be lifted no earlier than July 19.

In this situation, the British currency has lost some of its positions. Last Friday, July 2, the pound gained 0.5%. At the end of the second quarter of 2021, the pound remained in positive territory, having increased by 0.37%.

Throughout the past week, the pound has tried to maintain the positions it has gained. Last Friday, July 2, a strong support level near 1.3760 was formed in the GBP/USD pair. According to experts, bearish sentiments will continue in the tandem in the medium term. However, the bulls are determined and are not going to give up their positions. At the end of last week, they dominated the market, but now the situation may change.

Forecast Grid: Controversial GBP

Experts draw attention to the ambiguous technical picture of the pound presented on the quarterly chart. Over the course of two quarters, candles formed on it, indicating a possible collapse of the sterling to 1.3440. On the monthly chart, analysts have recorded the so-called "bearish engulfing" pattern. According to experts, to avoid a collapse, buyers will have to defend the level of 1.3670. The faster they raise the GBP to 1.3950, the more opportunities to get around the bears. At the moment, the bulls are actively acting in this direction, raising the GBP/USD pair to 1.3843.

At the start of trading on Monday, July 5, the GBP/USD pair was trading at 1.3821. However, on the approaches to the strong resistance level of 1.3852, the growth of the British currency slowed down. Later, experts recorded the beginning of the consolidation of the GBP/USD pair. At the moment, analysts consider it expedient to buy sterling. In the event of a breakdown of the powerful resistance level 1.3852, you can count on breaking the barriers 1.3925 and 1.3980.

Experts are optimistic about the short-term and medium-term prospects of the pound sterling. Currency strategists at Bank of America Global Research believe that the pound will maintain a positive trend until the end of 2021. The bank expects further cyclical growth of the British pound until the end of 2022. The GBP will be supported by such factors as strong economic growth in the country, the "hawkish" attitude of the Bank of England, as well as excess global liquidity and low currency conditions.

According to the observations of the bank's specialists, long positions in GBP turned out to be "among the first in the list of requests of the majority of investors." The current situation has increased the risk that the pound will become the "busiest" among the G10 currencies. However, in the second quarter of 2021, these fears eased as sterling traded in the same range. As a result, "the indicators of momentum and positioning have left the overbought zone, due to which the pound will rise in price in the coming quarters," BofA summarizes.