GBP/USD hits one-month tops, eyeing 100-DMA near 1.3800 mark
- GBP/USD regained strong positive traction on Tuesday amid a broad-based USD weakness.
- The recent hawkish BoE signals underpinned the British pound and remained supportive.
- A sustained move beyond 100-day SMA will set the stage for a further appreciating move.
The USD remained heavily offered through the first half of the European session and pushed the GBP/USD pair to one-month tops, closer to the 1.3800 mark in the last hour.
Following the previous day's modest downtick, the GBP/USD pair caught some fresh bids on Tuesday and built on its recent strong rebound from the vicinity of the 1.3400 mark touched in late September. This marked the fourth day of a positive move in the previous five and was sponsored by aggressive selling around the US dollar.
The greenback was weighed down by the overnight pullback in the US Treasury bond yields and dismal US Industrial Production data, which fell by the most in seven months. Apart from this, the dominant risk-on flow dragged the safe-haven USD to three-week lows and was seen as a key factor that provided a strong lift to the GBP/USD pair.
Meanwhile, the ongoing USD corrective decline suggests that the markets have fully priced in the prospects for an early policy tightening by the Fed. It is worth recalling that the FOMC meeting released last Wednesday reaffirmed that the Fed remains on track to begin rolling back its massive pandemic-era stimulus by the end of 2021.
On the other hand, the British pound was underpinned by the recent hawkish remarks from the Bank of England officials, signalling that an imminent interest rate hike later this year. In fact, the BoE Governor Andrew Bailey said that the British central bank will have to act amid increasing risks to medium-term inflation expectations.
With the latest leg up, the GBP/USD pair has now moved back closer to 100-day SMA pivotal resistance, currently around the 1.3805 region. A sustained move beyond will be seen as a fresh trigger for bullish traders and set the stage for additional gains amid absent relevant market-moving economic releases, either from the UK or the US.
That said, traders might take cues from scheduled speeches from the BoE Governor Andrew Bailey and BoE chief economist Catherine Mann for some impetus. Apart from this, comments by Fed Governor Michelle Bowman could influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
