GBP/USD ANALYSIS
- Latest UK financial knowledge supportive of GBP upside.
- Geopolitical noise plaguing markets.
CABLE FUNDAMENTAL BACKDROP
GBP/USD is testing key ranges after higher than anticipated employment knowledge and inflation earlier this week. This provides to the aggressive tightening outlook for the Bank of England (BoE), with markets roughly pricing in six interest rate hikes this 12 months (see desk under). Yesterday’s FOMC minutes was obtained by markets in a dovish gentle – though the minutes are barely outdated and have seen new knowledge since then (greater US inflation).
BOE INTEREST RATE PROBABILITIES
Supply: Refinitiv
With geopolitics (Russia/Ukraine) favoring a barely cautious strategy to markets this morning, sterling has shrugged off threat aversion for now. Different safe-havens have been bid however markets are oscillating as information is available in. Ought to tensions de-escalate I believe the pound will maintain its personal in opposition to the buck as there isn’t any cause (as of now) to revise the present hawkish outlook. This being stated, the greenback isn’t any completely different and its current bearish transfer could also be fading leaving GBP/USD in an fascinating state of affairs.
GBP/USD TECHNICAL ANALYSIS
GBP/USD DAILY CHART
Chart ready by Warren Venketas, IG
The every day GBP/USD chart reveals price action placing strain on channel resistance (black) which coincides with the 1.3600 psychological handle. This degree has been fairly resilient of current and a detailed above may see costs transfer in the direction of subsequent resistance targets.
From a bearish perspective, greenback fundamentals additionally favor USD power which has not filtered by as of but. This might be a pivotal second the place cable may pullback in the direction of 1.3500 after a powerful rally however with each central banks within the hawkish camp we’re unlikely to see any vital strikes up or down medium-term. Vary: 1.3400 – 1.3700.
Key resistance ranges:
- 1.3644
- Channel resistance
Key assist ranges:
IG CLIENT SENTIMENT SEES SHORT-TERM UPSIDE
IG Client Sentiment Information (IGCS) reveals retail merchants are at the moment marginally brief on GBP/USD, with 52% of merchants at the moment holding brief positions (as of this writing). At DailyFX we sometimes take a contrarian view to crowd sentiment leading to a bullish bias.
Contact and comply with Warren on Twitter: @WVenketas
