GBPUSD - narrow band between 1.4000 - 1.4500

US Dollar Highlights

• GBPUSD - narrow band between 1.4000 - 1.4500

• Growing tensions aboard

Sterling - US Dollar (GBPUSD) FX Technical Analysis

The Sterling Dollar exchange rate has traded in a relatively narrow band between 1.4000 and 1.4500 over the course of 2016 although it did dip below 1.4000 very briefly in February when Boris Johnson decided to join the campaign for the UK to leave the European Union. Sterling is still on fairly shaky ground in the months leading up to the referendum in June and the price action would suggest that the Pound will struggle to sustain any meaningful rallies. 1.4550 is now a decent level of resistance as it has been tested 4 times and not looked likely to break on any occasion.

The Federal Reserve was a little more dovish than the markets had anticipated in the March meeting. Most had expected them to continue with the status quo by leaving rates on hold but signal that as long as inflation and the labour market continue to strengthen as economic weakness overseas would not stop them raising rates fairly soon. The reality was that the Fed have reduced the amount of hikes they expect to make this year from 4 down to 2 and cited growing tensions abroad as a reason to sit on their hands. This gave Dollar buyers an opportunity to purchase at elevated levels when the exchange rate approached 2016 highs. Ultimately perhaps the Fed was not as dovish as the market were pricing in as it is still likely that there will be a rate rise or 2 this year if the data continues to improve. If that is the case, the Dollar should strengthen from here.

In the UK, the data has been fairly mixed of late with unemployment still falling. The forward looking PMI's still above the 50 level that is the dividing line between contraction, expansion and growth estimates being revised higher. The budget deficit continues to rise however and credit is becoming harder to obtain. The market focus though is clearly on the upcoming referendum and the Pound is being whipped around by rhetoric and opinion polls that are within the margin of error. For now, the market is trading on the uncertainty and the Pound is unlikely to make gains until we know what the landscape will look like after June 23rd.

Buyers

In the short term, 1.4550 looks like a very good level of resistance and I would suggest targeting no higher than here. Even a break of this level would only open up a move towards the downtrend resistance of 1.4800. A break below the recent low of 1.3800 would suggest a larger move lower to 1.3500.

Sellers

It's still looking quite good. Leave stop loss orders above 1.4550 which has proved to be a reliable level of resistance. A break below 1.3800 could open up a move towards the low 1.30's. Please contact your Halo Financial consultant for more information.