GBP/USD is showing sideway movements after staging an impressive recovery since October 2022. According to Credit Suisse, the British Pound (GBP) must close above the 1.2270 resistant level to enter into the bullish zone once again.
The key term used by Credit Suisse was 'sustained close,' which means a break above 1.2270 with strong bullish momentum is needed.
Credit Suisse explained that GBP/USD is currently trading below the 200 SMA (daily) as well as its January 2023 low of 1.1841. This prevents the double-top formation from appearing in the GBP/USD.
In technical trading, the formation of a double top is considered bearish - So on that front, it appears the GBP/USD is still neutral to mildly bullish at best.
The 1.2270 resistance level is the high formed during mid-February and will play a key role in determining the next direction for the GBP. A break above that will lead us to the year-to-date highs located near 1.2447 - 1.2449. At these levels, the GBP/USD will most likely cap once again and look for fresh momentum.
But if the GBP/USD breaks below its 1.2028 support level, it would be a sign of weakness and will take the pair around the 1.898 - 1.841 range.
Keeping the Credit Suisse forecast aside, it appears that there is a lot of upside potential for the GBP/USD. After all, the downtrend that started in 2021 made the GBP lose around 27% of its value against the USD. Although the GBP has recovered around 19% since then, there's still a lot of upside potential.
On the fundamental front, the Fed and the BoE policies will also effect the GBP/USD pair as it represents two major currencies. In the USD, the collapse of a few banks could force the Fed to not introduce a rate hike during the next meeting. But the same is also true for the GBP as the global economy is more interconnected than ever before.