British Pound – GBP/USD and EUR/GBP Technical Outlooks
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The US dollar is caught in a small down draft, prompted by a sell-off in US Treasury yields. After hitting a multi-year high of 5.26% last week, the rate-sensitive US 2 year is now offered at 5.02%, while the benchmark US 10 year is quoted at 4.82%, down from just over 5.02% last Monday. While US yields may stay higher for longer, a commonly quoted Fed refrain, a raft of currencies are paring back some of their recent losses against the greenback, in the short term at least.
Sterling is trading at a one-week high against the US dollar but further tests lie ahead for cable. On Wednesday the latest FOMC policy decision will be announced, followed by Fed Chair Jerome Powell’s press conference. The US central bank is expected to leave all policy levers untouched but Chair Powell’s post-decision commentary will be closely parsed for any clues on the health of the US economy. On Thursday, the Bank of England is also expected to leave interest rates unchanged, while the market will wait to hear the latest from BoE Governor Andrew Bailey at his post-decision press conference.
Cable has short-term support between 1.2070 and 1.2090 with a break of the former opening the path to the October 4th low at 1.2038. A cluster of recent highs will see the pair struggle to break 1.2303 in the short-term,
GBP/USD Daily Price Chart
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of clients are net short.
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The Euro has been strengthening against the British Pound over the last few weeks and has taken out a prior level of channel resistance. EUR/GBP is now trading at its highest level since early May and, more importantly, has broken above all three simple moving averages with conviction. Prior resistance now turned support around 0.8700 and should hold in the short-term with the 20-day sma at 0.8680 as the next level of support. If the Euro continues to firm then the next level of horizontal resistance is situated around 0.8828.
EUR/GBP Daily Price Chart
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