GBP/USD rises to two-week highs, all eyes on US tax bill

GBP/USD clocks two-week high of 1.3241.
A possible explanation for the rally - yesterday's upbeat UK retail sales and flattening of the T-yield curve.

Omkar Godbole FXStreet Contributor

The upside in GBP has gathered traction in Asia, with the GBP/USD pair rising to a two-week high of 1.3238.

The move higher lacks clear fundamental trigger. Thus, a 47 pip rally could be due to Asian desks responding to yesterday's better-than-expected UK retail sales release.

Also, the treasury yield curve flattening and the resulting broad-based USD weakness are pushing the Cable higher. As of writing, the dollar index is down 0.33 percent and the GBP/USD is trading at 1.3240. the spot looks set to test the 50-day moving average stationed 1.3255.

Looking ahead - USD could take cues from US tax reform news. Kathy Lien from BK Asset Management writes, "as expected, the House voted and passed their version of the tax reform bill. This triggered a nominal rally in the greenback because while this is good news, everyone knows that the real hurdle is in the Senate.

Senator Ron Johnson and Susan Collins became the first Republicans to come out against the Senate bill, which could become a serious problem because the GOP cannot afford to lose more than 2 votes as they only have 52-48 majority in the Senate and no Democrats are willing to support the bill. Also, the Senate and House still have to reconcile their bills before they are combined into a final plan that is voted on by both houses of Congress. So it will still be a long road ahead before President Trump signs tax reform into law, especially if the Republicans keep trying to tie in the Affordable Care Act."

GBP/USD Technical Levels

A move above 1.3255 (50-day MA) would open up upside towards 1.3268 (38.2% Fib R of Sep. 20 high/Oct. 6 low) and 1.33 (psychological level). On the downside, breach of support at 1.3214 (Wednesday' high) would expose 1.3190 (session low). A violation there could yield a deeper pullback to the upward sloping 10-day MA currently seen at 1.3166.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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