GBP/USD clocks 9-day high, what’s next?

GBP/USD pair clocked a 9-day high of 1.2875 in Asia as the Trump’s tax plan failed to impress the USD bulls. 

Range breakout on cards?

GBP/USD has been largely restricted to a narrow range of 1.2860-1.2770 for a week now as investors try to gauge the impact of a May’s victory in the June elections on Brexit negotiations. 

The polls released on Wednesday showed conservatives maintaining a healthy lead with 49% support. The market is already seeing a May win as a sure thing and is implying it will improve her negotiating position.  Hence, the currency remains well bid, although it must be noted that the spike seen on April 19 was largely due to unwinding of the GBP shorts. 

The British Pound is still one of the most hated currencies. An upside break from the recent trading range appears more likely than note given the American dollar is on the back foot following the Trump tax plan disappointment. 

If the ECB talks about QE taper the EUR/USD would spike, leading to another wave of broad based USD selling and GBP/USD rally.

GBP/USD Technical Points

The daily RSI is yet to enter the overbought territory. The hourly RSI and 4-hour RSI is once again turning higher. Thus, the pair could have another look at 1.29 levels, in which case the daily and Intraday RSI would hit the overbought region. 

On the higher side, a daily close above 1.2903 (Apr 19 high) would open doors for a test of supply around 1.30 (psychological figure) and 1.3059 (Aug 30 low). On the lower side, breach of the session low of 1.2837 could yield a pull back to 1.2755. A daily close below the same would signal a short-term top is in place and could yield a sell-off to 1.2706 (Feb 2 high) and 1.2615 (Mar 27 high).