GBP/USD through R1 but stuck between key daily smas and range bound

Ross J Burland FXStreet

While we await the FOMC minutes, currently, GBP/USD is trading at 1.2457, down -0.11% on the day, having posted a daily high at 1.2510 and low at 1.2423.

GBP/USD is range bound ahead of the FOMC minutes today and after a disappointing set of rhetoric from the BoE of late in respect to inflation and outlooks for the UK economy. Brexit remains a key concern among investors despite the surprising performance of the UK to date since the referendum decision and vote to leave the EU.

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"The UK has more Article 50 debating in the House of Lords and testimony from BOE Governor Mark Carney to the Treasury Select Committee," explained Kit Juckes, an economist at Societe Generale, adding, "Sterling had a good day in yesterday's think markets and is back down this morning. I'm not sure it's going anywhere, but if 0.8450 breaks on the downside in EUR/GBP a tactical short makes sense, though by the same token, a break back below GBP/USD 1.2350 will get some chartists excited about a return to 1.20"

GBP/USD levels

GBP/USD has been trading between the 20 and 50 d sma for the best part of this month so far. These barriers are breakout levels at 1.2493 and 1.2390 to the downside on a daily closing basis. We have seen a test to the upside but without a fundamental catalyst, the price is capped on the 1.25 handle.

However, to the downside, analysts at Scotiabank noted that last week’s lows (twice tested) at 1.2385 represented the effective lower bound. "We still think the GBP remains vulnerable to weakness in the near-to-medium term on Brexit and the stronger USD but we continue to view the GBP as nearing attractive levels for longer run “value” bets—especially on some of the more beaten up crosses (EURGBP, GBPCAD)." Today, the analysts noted that recent support has been observed at 1.24 and said a break would open up risk to the early Feb low around 1.2350 followed by 1.2280.

GBP/USD trading above R1

1. R3 1.2483
2. R2 1.2463
3. R1 1.2447
PP 1.2427
1. S1 1.2411
2. S2 1.2391
3. S3 1.2375

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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