- GBP/USD surges on improving business optimism, diminishing odds of a BoE rate cut.
- A modest USD pullback remained supportive of the overnight rally of around 120 pips.
- Bulls take a breather near 61.8% Fibo. level; dip-buying should help limit the downside.
The British pound rallied across the board on Wednesday and pushed the GBP/USD pair to two-week tops, around mid-1.3100s. Record improvement in the gauge of optimism in the manufacturing sector was seen as a key trigger for the pair's sharp appreciating move of around 120 pips. According to the CBI survey, the Quarterly Business Situation Index jumped sharply to +23 in January from -44 in October. This marked the stronger level since April 2014 and the 67 points quarterly swing was also the largest on record since 1958.
The data added to the latest optimism led by Tuesday's stronger-than-expected UK wage growth figures and forced investors to temper expectations for an imminent interest rate cut by the Bank of England at its upcoming meeting on January 30. Apart from this, possibilities of some short-term trading stops being triggered above the 1.3100 round-figure mark and a modest US dollar pullback further contributed to the pair's strong intraday upsurge to the highest level since January 8.
As investors digested the overnight positive move, the pair witnessed a modest pullback during the Asian session on Thursday. Bulls seemed rather unimpressed by the fact that the House of Lords finally approved the UK Prime Minister Boris Johnson’s Withdrawal Agreement Bill (WAB) without any change. In absence of any major market-moving economic releases, either from the UK or the US, any incoming Brexit-related headlines might influence the sentiment surrounding the major and produce some meaningful trading opportunities.
Short-term technical outlook
From a technical perspective, the overnight positive move stalled near a resistance marked by 61.8% Fibonacci level of the 1.3285-1.2954 recent slide. However, the fact that the pair on Wednesday decisively broke through a three-week-old descending trend-channel, the near-term technical set-up might have already shifted in favour of bullish traders. Hence, any subsequent pullback towards 200-period SMA on the 4-hourly chart, around the 1.3100 round-figure mark, might still be seen as a buying opportunity and should help limit the downside near the 1.3080 region (38.2% Fibo. level).
On the flip side, sustained move beyond the previous session's swing high, around mid-1.3100s, has the potential to lift the pair back towards reclaiming the 1.3200 round-figure mark. The momentum could further get extended towards mid-1.3200s and late December/early January swing high resistance near the 1.3285 region.
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
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Optimism price could fall as nearly $90 million worth of OP tokens is due flood markets
Optimism volatility has shrunk in the ours leading to the network’s cliff unlock. It joins the likes of dYdX and Sui, which have similar events on their calendars. As token unlocks are often considered bearish catalysts, investors should brace for a reaction after the event.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.