GBP/USD looks to $1.40 on vaccine optimism & weaker USD. FTSE breaks out of holding pattern.

GBP/USD heads towards $1.40

Vaccine optimism, declining daily COVID infections and hopes surrounding the reopening of the UK economy is supporting the Pound.

The risk on market mood undermines the safe haven US Dollar.

GBP/USD trades at the highest level since April 2018 (FXB, UDN)

GBP/USD technical analysis

GBP/USD trades within and ascending channel dating back to early September. The price trades approximately in the middle of this channel supported by the ascending 20 & 50 sma on the daily chart – an established bullish trend.

The RSI is on the verge of overbought territory which warrants some caution before placing bullish bets. Instead waiting for some consolidation or a slight pullback before buying in could be prudent.

A break through immediate resistance at 1.3970 could see the pair test the key psychological level of 1.40.

Immediate support can be seen at 1.3850 before 1.38, although moves to these levels could be seen as dip buying opportunities. Stronger support can be seen at 1.3760.

FTSE breaks out

The FTSE is on the rise after an upbeat session in Asia where Nikkei crossed 30,000 for the first time in 30 years.

Upbeat market mood supported by vaccine optimism, US stimulus hopes and rising oil prices.

WTI tops $60 on hopes for the global economic recovery.

US & Chinese markets closed for public holidays.

FTSE technical analysis

The 4 hour chart shows that the FTSE was trading within a horizontal channel since early February, capped on the downside by 6485 and the upside by 6570.

The price closed above the upper band on Friday and has continued to extend gains at the start of the week testing horizontal resistance at 6650.

The RSI has pushed into overbought territory so it some consolidation or a slight easing back could be on the cards before further gains.

Resistance beyond 6650- can be seen at 6700 (high 26th Jan). SA move through this level could see the upside gain traction.

Immediate resistance turned support can be seen at 6575, the upper band of the horizontal channel, before 6485 the lower band. A break below 6430 could more bears push the price lower.