The broad based USD selling following the FOMC rate decision pushed the GBP/USD pair above 1.31 handle. The pair remained well bid in Asia and rose to 1.3149; its highest level since September 2016.
However, investors aren’t buying the bullish breakout. As seen on the chart below, the 3-month 25-delta risk reversal remains depressed.
The risk reversal has remained flat lined in the range of minus 0.70 to minus 0.80 from June 29. During the same time period, GBP/USD has established higher lows. The divergence clearly indicates the investors are still skeptical about the rally.
US-UK 10-yr yield spread
- The yield spread has been steadily losing height in favor of the British Pound. The spread now hovers close to the support offered by the trend line sloping higher from the Q2 2016 low and Q4 2016 low.
- The spread could drop below the trend line support if the US durable goods orders data due for release at 12:30 GMT disappoints expectations. A break below the trend line could yield another leg higher in the GBP/USD pair.
GBP/USD Technical Levels
The daily chart shows a rising wedge formation. The immediate resistance is seen at 1.3170 (wedge hurdle) ahead of 1.32 (psychological level) and 1.3274 (161.8% Fib ext. of Jan 16 low - Feb 2 high - Mar 14 low). On the downside, a break below 1.3106 (session low) would open up downside towards 1.3061 (5-DMA) - 1.3050 (10-DMA) and 1.30 (psychological level).
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 trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar influenced by the hawkish market sentiment surrounding the Federal Reserve and expectations of prolonged higher interest rates.
GBP/USD: The first downside target is seen at the 1.2600–1.2605 zone
GBP/USD trades on a weaker note around 1.2620 during the early European session on Friday. The decline of Pound Sterling is backed by the growing speculation that the BoE will begin the rate-cut cycle this year.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.