GBP/USD: Bears won’t give up amid trade woes, higher T-yields, BOE in focus

Brexit optimism offset by trade tensions, stronger 10-year T-yields.
Cable could drop to 1.2950 on upbeat US PPI data release.
BOE’s status-quo to also add to the GBP weakness.

Dhwani Mehta FXStreet

The GBP/USD pair keeps the offered tone intact amid widespread risk-aversion and monetary policy divergence, as we progress towards the European opening bells.

GBP/USD: Further downside likely in play

The higher-yielding pound remains exposed to the further downside below a break of the 1.3000 levels and could test the 1.2950 support, as the bears remain in control amid fresh trade tensions sparked between the US and Japan while the US-China trade dispute looms.

While the greenback continues to remain underpinned by the risk-averse market environment, stronger US jobs data reinforces Fed’s rate hike plans and brings the monetary policy divergence back in play, which is likely to weigh down on the GBP. The BOE is likely to leave the rates unchanged when it announces its monetary policy decision tomorrow.

Also, the spot could suffer amid higher Treasury yields on expectations of a faster pace of Fed tightening that will likely keep the sentiment around the US dollar buoyed. The 10-year treasury yield jumped to a five-week high of 2.98%.

In the day ahead, in absence of any UK macro news, the focus will remain on the US PPI release and Brexit-related news, especially after EU’s Barnier said that the Brexit deal is realistic within the next 8 weeks.

GBP/USD Technical Levels

“According to readings in the 4 hours chart, as it met buyers on a dip toward a bullish 20 SMA, which continues advancing above the 200 EMA. In the same chart, technical indicators have bounced from their midlines, although the upward momentum is limited and indicators stand well below their daily highs. Support levels: 1.2985 1.2940 1.2890. Resistance levels: 1.3050 1.3095 1.3130,” FXStreet’s Chief Analyst Valeria Bednarik noted.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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