GBP/USD Breaks Out of Flat Zone, Plunges to $1.25400


A daily drop of 100 pips occurred on the GBP/USD currency pair chart yesterday seeing pressure mounting for the Pound at the opening of April trading.

The situation of a significant drop in prices in the New York session yesterday was driven by the reaction of the strengthening of the US dollar following the ISM survey data for the US manufacturing sector recording encouraging readings.

This at the same time reduces expectations regarding the interest rate reduction measures to be implemented by the Federal Reserve (Fed) in June.

Thus, the US dollar strengthened significantly yesterday and buried most other major currencies including the Pound.

Looking at the GBP/USD chart, prices have finally broken out of the flat zone over the past week with a significant plunge yesterday.

The decline in price broke past the 1.26000 zone hitting a recent 7-week low at 1.25400.

Price movement below the Moving Average 50 (MA50) barrier line on the 1-hour timeframe on the GBP/USD chart reinforces the tendency for prices to continue the bearish trend.

The price was flat at the 1.25400 level that was reached until the end of the New York session and continued into the Asian session this morning (Tuesday).

The lower price drop is expected to continue after this to further test the support level which is at 1.25000.

The last time the level was tested was in December trading last year and it still hasn't been broken until now.

But it is not impossible for the price increase to happen again and go against the current of movement displayed yesterday.

The price increase will test the nearest resistance at 1.26000 and if it breaks the MA50 barrier it will be an early signal for a bullish trend change.

Only then is the price increase expected to reach a higher level again by targeting 1.27000.