Yesterday, the pound sterling showed impressive growth during the European session and came to a standstill during the North American session. The surge came after German Chancellor Olaf Scholz had announced there would be no embargo imposed on energy supplies from Russia. It was reported on Monday that the European Union was mulling over such a step while preparing the fifth package of sanctions against Russia. US President Joseph Biden said yesterday that the sanctions regime against Russia will be tightened during his visit to the EU. The bull run of the euro stopped right after the announcement. Therefore, the European economy is still at risk. Olaf Scholz even had to admit that sanctions on Russia have also hit the European Union. This means that Germany as the largest EU country is not ready for further sanctions confrontation. In other words, Germany no longer wants to impose new restrictions, while the United States intends to strengthen them further. A lot now depends on Biden's visit to Brussels. Meanwhile, the market is likely to be flat until then.
Having traded sideways in the range between 1.3100 and 1.3200 for several days, GBP/USD was able to finally break through its upper limit. A breakout was followed by an increase in speculation, and the pound strengthened by more than 140 pips.
The Relative Strength Index has reached the overbought zone on the 4-hour chart amid strong bullish momentum.
The Alligator indicator is signaling an uptrend on the 4-hour chart and a downtrend on the daily chart.
Outlook:
The corrective move from the psychological level of 1.3000 goes on. The target is now seen at 1.3300. The pair may extend growth to 1.3370 if it breaks through the barrier.
Alternatively, if the overbought signal is confirmed, the uptrend may slow down and even reverse.
In terms of complex indicator analysis, there is a signal to buy the pound for short-term and intraday trading because of the recent bullish impulse. In the medium term, technical indicators signal to sell the pair due to the downtrend movement.