- GBP/USD has regained bullish momentum on dollar weakness, Brexit optimism.
- US Treasury bond yields continue to impact greenback's valuation.
- A daily close above 1.3700 could bring in additional buyers.
The GBP/USD pair broke out of its weekly trading channel on Wednesday and extended its advance to a fresh 15-day high near 1.3700 on Thursday amid dollar weakness and Brexit optimism.
Although the initial reaction to the US inflation data, which showed that the annual Core Consumer Price Index stayed unchanged at 4% in September, provided a boost to the greenback, slumping US Treasury bond yields forced the currency to weaken.
Reflecting the broad-based selling pressure surrounding the greenback, the US Dollar Index registered its largest one-day decline in nearly five months as it fell more than 0.5%.
After losing nearly 6% in a two-day span, the benchmark 10-year US T-bond yield is holding above 1.5% on Thursday, helping the dollar stay relatively more resilient.
Nevertheless, the European Union's proposal to relieve some of the pressure on the movement of goods to Northern Ireland is assessed as a positive step toward a solid solution. European Commission vice-president Maros Sefcovic told Reuters that the EU's package should not be seen as a "take it or leave it" offer but noted that they wouldn't present a new proposal if this one was rejected by the UK.
Supported by the Bank of England's (BoE) hawkish outlook and Brexit headlines, GBP/USD is likely to keep its footing even if the dollar manages to regain its traction.
GBP/USD technical analysis
The 200-period SMA on the four-hour chart aligns as the first resistance at 1.3700. GBP/USD is currently testing this level but the Relative Strength Indicator (RSI) on the same chart rose above 70 for the first time since early September, suggesting that there could be a technical correction before the next leg up.
In case buyers continue to defend this level and the pair ends the day above it, the next interim hurdle could be seen at 1.3720 (upper line of ascending regression channel coming from late September) ahead of 1.3750 (September 23 high).
On the downside, 1.3680 (middle line of the regression channel) is the first support before 1.3640 (lower line of the regression channel) and 1.3600 (psychological level/100-period SMA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.