GBP/USD slumps to 1.3470 amid tumbling UK yields

The Asian recovery in GBP/USD ran into stiff resistances located near 1.3550 levels, knocking-off the rate sharply lower to test Monday’s low struck at 1.3466.

GBP/USD losing sight of 1.35 handle?        

Monday’s corrective slide in the spot appears to have regained poise, after a temporary pullback, as the European traders continue to assess the implications of the BOE Governor Carney’s speech at the IMF event, where he reiterated that any rate hikes are expected to be ‘gradual’ and ‘limited’.

The less hawkish tone from the BOE Chief Carney is well reflected upon the UK Gilt yields, which are seen in a sea of red across the curve, especially with the 2-year rates diving almost 5%. The shorter duration UK yields usually mimic the interest rate expectations.

On the other hand, the US rates trade more or less steady, lending some support to the US dollar versus its major peers, while adding to the renewed weakness in the major.

Looking ahead, the next major event for Cable remains the UK retail sales and FOMC decision due on the cards tomorrow. In the meantime, markets look forward to the US housing and current account data for fresh signals.

GBP/USD levels to consider             

Slobodan Drvenica at Windsor Brokers Ltd. writes: “Violation of Monday’s low would generate stronger bearish signal, while extension below pivot at 1.3439 (Fibo 38.2% of 1.3148/1.3618 upleg) is needed to confirm correction. Alternatively, sustained break above very thick hourly cloud (spanned between 1.3551 and 1.3383) will be bullish signal. However, the pair may remain within extended consolidation while pivotal boundaries stay intact Res: 1.3551; 1.3582; 1.3618; 1.3646 Sup: 1.3487; 1.3465; 1.3439; 1.3383.”