The GBP/USD pair dipped to a low 1.5630 in the early European session on Monday, before recovering sharply to print a session high of 1.5726 levels. The spot failed to take out 1.5690 on the closing basis on Friday as the Sterling, thereby keeping the range of 1.5460-1.5690 intact.

GBP bulls await correction in equities

The doors are opened for the pair to extend the rally to +1.5750 levels. The traders look out for signs of technical correction in the equities across the globe, which would stabilize the risk sentiment. Sterling remained resilient, unwilling to drop against the USD, despite the risk aversion. Consequently, a stability in the risk sentiment is likely to result in the GBP strength, more so, as the UK CBI was on the wires today, stating that a rate hike is likely to happen in Q1 2016. The gains could be capped in case the Fed’s Lockhard talks up rate hike expectations. However, hawkish comments from Lockhart could stabilize equity markets in the US (rate hike = +ve for US and world economy) and support risk assets.

Technicals – Awaiting daily close above 1.5690

Sterling’s reversal from the support at 1.5639 (38.2% of June rally), followed by a rise above 1.5690 today indicates the momentum is in favour of a rise to 1.5750 (23.6% of June rally). A break above the same could open doors for 1.58-1.5814 (May 2015 high). On the downside, a failure to rise above 1.5725 could push the pair back to 1.5639 levels. The positional outlook would turn bullish only in case of the daily close above 1.5690, confirming an upside breakout from 1.5460-1.5690 range.

GBPUSD

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