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On Monday, the GBP/USD currency pair extended its moderate bullish momentum after opening with a gap at the start of trading and continuing its recovery from the psychological 1.3300 level.
The pair's intraday gains are driven by broad-based U.S. dollar weakness and the return of spot prices toward the psychologically important 1.3500 level.
Developments over the weekend fueled optimism regarding a possible peace agreement between the United States and Iran, putting pressure on the U.S. dollar. In addition, the intraday decline in oil prices to their lowest levels in the past two weeks eased inflation concerns and led to a sharp drop in U.S. Treasury yields. This exerted additional pressure on the dollar and provided notable support for the GBP/USD pair.Nevertheless, disagreements between the United States and Iran on key issues, including the situation in the Strait of Hormuz and Iran's nuclear program, remain unresolved. On Sunday, U.S. President Donald Trump stated that his administration does not intend to rush into a deal with Iran. This may limit market optimism, especially when combined with expectations of further hawkish actions from the U.S. Federal Reserve, which in turn should help contain the dollar's decline.Traders are already fully pricing in a 25-basis-point interest rate hike by the Federal Reserve in January 2027. These expectations are supported by persistent inflation data in the United States and recent hawkish comments from key members of the Federal Open Market Committee (FOMC). At the same time, investors have revised their expectations regarding the next interest rate hike by the Bank of England, adding further caution among GBP/USD bulls.
From a technical perspective, the pair is attempting to break above the 100-day SMA and then the 20-day SMA near the psychological 1.3500 level. If prices manage to consolidate above these levels, bulls will gain an opportunity for further upside development. Support is provided by the 9-day EMA. Below it are the 50-day and 200-day SMAs. Failure to hold above these levels would likely see the pair find support near the psychological 1.3400 level. As long as oscillators remain in negative territory, bulls may struggle to maintain control.
The table below shows the percentage change in the U.S. dollar against the listed major currencies for the current trading day. The U.S. dollar posted its strongest gain against the Canadian dollar.
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