GBP/USD - Neutral set up ahead of the BOE
|- Post-FOMC rally has neutralized the short-term outlook.
- BOE to stay on hold, focus on forecasts.
GBP/USD rose to a 4-day high of 1.3449 in Asia as the Asian desks offered USD, tracking the post-FOMC decline in the treasury yields.
PM May's parliamentary defeat a negative
Reuters report says, "Prime Minister Theresa May's government was defeated on Wednesday, when lawmakers forced through changes to its Brexit blueprint that ministers said could endanger Britain's departure from the European Union. The 650-seat parliament voted 309 to 305 in favour of an amendment to hand lawmakers more say over a final exit deal with the EU."
Though negative, the GBP/USD still remains bid, courtesy of the broad-based sell-off in the USD.
All eyes on BOE
Markets expect the Bank of England (BOE) to keep the interest rates unchanged. Kathy Lien from BK Asset Management writes, "since the last monetary policy meeting, the UK economy firmed with wages rising, inflation increasing, house prices accelerating and most importantly, economic activity strengthening in the manufacturing, service and construction sectors. However, we don't expect the central bank to change their tone and a steady outlook could hurt more than help the pound."
GBP/USD Technical Levels
The pair has retaken the ascending trend line and that has neutralized the short-term outlook. Still, it is too early to say that the Dec drop has ended as the descending top pattern is still intact.
FXStreet Chief Analyst Valeria Bednarik writes, "the GBP/USD pair traded as high as 1.3427 failing to overcome a Fibonacci resistance, but presenting a positive short-term tone anyway, as the price recovered above its 20 SMA, now with no directional strength, as technical indicators entered positive territory for the first time this week, although with no strength upward. The pair will need to surpass the mentioned high to extend its gains, but would take a hawkish surprise from the BOE to push it beyond 1.3500 this Thursday."
Support levels: 1.3385 1.3345 1.3310
Resistance levels: 1.3430 1.3465 1.3500
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