GBP/USD: Sell the pullbacks ahead of BOE?

The GBP/USD pair extended its rebound from below the mid-point of 1.32 handle and went on to test the 1.33 handle in Asia, although further upside appears to lack follow-through, as investors remain wary ahead of the key risk events for today – the BOE rate decision and Quarterly Inflation Report (QIR) release.

GBP/USD: Bulls take a breather

Having consolidated briefly near 1.3250 levels in the early trades, the spot caught a fresh bid wave and staged a solid rebound to regain 1.3300 levels, but in vain, as the bears continue to guard the last, sending GBP/USD back into the consolidation phase near 1.3285/90 region.

The latest upsurge in Cable can be attributed to fresh selling that gripped the US dollar broadly, in the wake of a major turnaround in risk sentiment reflected upon by falling US equity futures and Treasury yields.

Looking ahead, the next move in the major will be determined on the UK construction PMI release. However, the reaction to the UK PMI data could be limited, as the main market-moving event for the pound remains the BOE policy decision, with a rate hike already discounted by the markets. Hence, fresh GBP selling on the BOE decision cannot be ruled out, as markets could resort to ‘Sell the fact’ trading.

GBP/USD Technical View

Valeria Bednarik, Chief Analyst at FXStreet, explained: “The pair holds on to gains weekly basis but lost upward potential ahead of October high of 1.3336, still the critical resistance to overcome to confirm a steeper advance. In the 4 hours chart, technical indicators head south within the positive territory and coming from overbought readings, but the price holds above its 20 SMA and 200 EMA, both around the 1.3220 level. This last support will be key during the upcoming sessions, as if the price moves back below it, the risk will turn towards the downside. Support levels: 1.3220 1.3180 1.3145 Resistance levels: 1.3300 1.3335 1.3360.”