GBP/USD rises to a high of 1.2483 on the day
Buyers are beginning to work their forward a little bit on the session as the pound is creeping slightly higher amid the release of the May monthly GDP data earlier and higher UK gilt yields. Of note, 10-year gilt yields are up by 6 bps on the session to 0.78% – their highest level in a week amid a bit of a beat down in European bonds.
In my view, the GDP data earlier failed to offer us anything new and just reaffirms weakening economic conditions in the UK seen in Q2 2019; despite what the headline reading or the 3m/3m reading may suggest.
Looking at the cable chart, price is now running into minor resistance at 1.2481 as sellers still hold near-term control with price trading below both key hourly moving averages. That remains the risk for sellers in the near-term.
In the bigger picture:
It’s all about trying to find a firm daily break below the January low of 1.2441. Price managed to hit a low of 1.2440 in overnight trading but failed to hold a break to the downside, leading to a minor bounce towards the close.
From a technical perspective, that could suggest a bit of a pause as we approach key support levels but given the pound outlook, it’s hard to argue for prolonged strength in the quid so long as Brexit uncertainty continues to linger.
As such, be on the look out if price retraces back towards 1.2500 and the 100-hour moving average at 1.2520 as I reckon sellers will be poised to add to shorts around the region. That said, the dollar will be under heavy scrutiny today with all eyes being on Fed chair Powell so that will be the next key factor affecting cable – more so in the near-term than what the technicals and sentiment is suggesting at the moment.