Rishi Sunak, the British Chancellor of the Exchequer, has just delivered his second budget. With the country still under COVID restrictions, and the prospect of the economy reopening still months away, fundamental traders are looking for signs to the future direction of the British Pound.
Looking at the chart of GBP/USD the level of the round number of 1.40 has been a strong level of support and resistance all the way back from the 90s.
The recent price action is at an overall uptrend, with moving averages (MA) 10, 20, and 50 all fanning and in the correct order for an uptrend. Price has also had a sharp rise above the 1.40 level last week, before retracing back below it. For the last couple of days price has been consolidating underneath this long-term level.
Moving to the 4-hour chart, there could have been many sellers at this level, pushing the price lower and making a lower low. However, buyers appear to have come back and pushed the price higher to make an equal high. This may now cause a tug of war between the buyers and the sellers under this key level.
As there is no clear winner now the market will be watched very closely. It will be important to look for a strong decisive break above the 1.40 level with a close above it and a pullback to test this level from above. Alternatively, the build-up of buyers’ momentum underneath this level and a breakout opportunity should be closely watched.