The GBP/USD made another attempt to take out 100-DMA on closing basis on Monday but failed to do so and ended at 1.5462 levels. The rise to an intraday high of 1.5496 was largely fuelled by the sell-off in the EUR/GBP pair. However, the sell-off in the cross came to a halt in the NY session, which pushed the cable back to 1.5462 levels. The pair currently trades around 1.5480.
Poised for an upside breakout?
The pair has been largely restricted to a range of 1.5410-1.5510 in the last few sessions. The likelihood of an upside breakout is high since the EUR/GBP sell-off could continue ahead of the Thursday’s ECB meeting. On technical charts, an immediate support to the EUR/GBP chart is seen directly at 0.7260 levels. The pair currently trades around 0.7320.
Furthermore, the UK domestic data – Retail sales and the British Retail Consortium’s strong sales report – due later this week could show the consumer spending continued to recover in September. The combined effect of strong UK data and the sell-off in the EUR/GBP would be enough to trigger an upside break from the trading range of 1.5410-1.5510.
On the other hand, a downside breakout could be possible in case ECB’s Draghi disappoints, while US housing data manage to push up December rate hike bets.
Technicals – Trendline resistance remains intact
Sterling’s NY closing at 1.5462 kept the falling trend line resistance intact. A probability of an upside break from the trading range of 1.5410-1.5510 would increase in case the spot manages to take out the trend line resistance currently seen at 1.5466 on the closing basis today. On the other hand, a minor sell-off could be seen in case the spot fails to sustain above 1.5466 today. However, the losses appear restricted around 1.54 (50-DMA) – 1.5387 (Oct 13). Moreover, it would take a daily close below 1.5387 for the outlook to turn bearish.
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