The GBP/USD pair extends its side-trend into early Europe, as the bulls try hard to recover ground, after yesterday’s hawkish Fed induced sell-off from near mid-1.36s.
GBP/USD: A break above 5-DMA (1.3512) needed
The spot is seen struggling hard to take on the recovery above 1.35 handle, as the bears continue to guard the last amid persisting demand for the greenback across the board, after the Fed’s hawkish surprise offered the much-needed respite to the USD bulls.
US interest rates and the US dollar surged post FOMC - Westpac
The greenback continues to keep an edge over its British counterpart, as the yield differential between the US and UK yields continue to favor the buck. Recall that the BOE Governor Carney toned down his hawkish bias earlier this week, reiterating that that any rate hikes are expected to be ‘gradual’ and ‘limited’.
However, the ongoing corrective move lower in Cable continues to find support near the midpoint of 1.34 handle, as yesterday’s unexpected jump in the UK retail sales data combined with expectations of a BOE rate hike sooner (than later) continue to underpin the sentiment behind the GBP.
Focus now shifts towards the UK public sector net borrowing data and US economic release for fresh momentum on the prices.
GBP/USD levels to consider
Haresh Menghani, Analyst at FXStreet writes: “A decisive break below a short-term ascending trend-channel resistance break-point, now turned immediate strong support near the 1.3440-30 region, would negate the bullish bias and trigger a near-term corrective slide. Below the mentioned support, the pair is likely to break below the 1.3400 handle and head towards testing 1.3330 intermediate support en-route the 1.33 handle and 1.3280 horizontal support.”
“On the upside, 1.3550 level now seems to act as immediate resistance, which is followed by a strong hurdle near the 1.3600 handle, which if conquered should pave way for extension of the pair’s up-move beyond 1.3660 level towards the 1.3700 round figure mark,” Haresh adds.
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