The pound made headlines yesterday as it rallied sharply to a new post-Brexit high of about 1.3940 against the dollar. But it wasn’t able to hold onto its gains as the dollar made a comeback across the board. The greenback bounced perhaps because of the fact that the implied probability of the Federal Reserve hiking interest rates three times this year rose to 55% from about 48% on Tuesday. This brought the market’s view in line with the Fed’s own projections. Though we had a stronger-than-expected industrial production figure out of the US, there was no obvious trigger for the increase in rate hike expectations. Further strengthening of US data should help to encourage the Fed from tightening its belt. Meanwhile the FOMC knows very well that there are increased risks that the dollar will likely appreciate in value over time as the Fed further tightens its belt. But the dollar’s weakness throughout 2017 and at the start of this year means, unlike for the ECB, that the exchange rate isn’t a big issue for the Fed when it comes to making a rate hike decision – at least for now anyway. So, it could be that the soft dollar has actually helped to raise market’s expectations about US rate hikes.

If the dollar were to make a more meaningful comeback then out of the major currencies, those where the central bank is still dovish should lose out against the greenback. But even the rallying pound could come under some short term pressure, not least because of technical reasons. Yesterday saw the GBP/USD rally sharply into a key resistance area which we had previously identified HERE. As can be seen on the chart, the cable probed liquidity that was resting between 1.3835 and 1.4015, the pre-Brexit low. Once support, this area was always going to provide some resistance and so it proved yesterday as price gave back a big chunk of its advance here. Whether or not resistance will hold here for too long remains to be seen, however. Indeed, the GBP/USD was trading higher again at the time of this writing. But there’s still the potential we could see at least a short term top in this region given the technical and psychological significance of these levels. The sellers will need to chop some wood, though, as the trend is clearly bullish for now. There are lots of support levels that need to be taken out in order for the bulls to lose control in a meaningful way. Among other levels, 1.3500/5 is important to watch as this was the base of the latest breakout. If this level fails to hold as support then we may see a sharp pullback towards the next support at 1.3655, 1.3610 or possibly 1.3555 next.

GBPUSD

Trading leveraged products such as FX, CFDs and Spread Bets carry a high level of risk which means you could lose your capital and is therefore not suitable for all investors. All of this website’s contents and information provided by Fawad Razaqzada elsewhere, such as on telegram and other social channels, including news, opinions, market analyses, trade ideas, trade signals or other information are solely provided as general market commentary and do not constitute a recommendation or investment advice. Please ensure you fully understand the risks involved by reading our disclaimer, terms and policies.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD: A tough barrier remains around 0.6800

AUD/USD: A tough barrier remains around 0.6800

AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.

AUD/USD News
EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.

EUR/USD News
Gold surrenders gains and drops to weekly lows near $2,550

Gold surrenders gains and drops to weekly lows near $2,550

Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.

Gold News
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures