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The GBP/USD exchange rate is quoted at 1.2985 ahead of the weekend having advanced 1.50% this week. Analyst and technical forecaster Richard Perry of Hantec Markets lays out the key levels to watch in the short-term.
How GBP/USD reacts around the resistance band 1.2980/1.3050 is the next important move.
This band was the old key floor throughout August, and houses all the stale bulls who bought during the last run higher.
Now into September, this has become a band of overhead supply of potential sellers. If this rebound is used as an opportunity to sell then the medium term neutral outlook will continue.
A range between 1.2760/1.3035 has been in place since the breakdown below 1.2980 was seen last week.
With momentum indicators increasingly neutral, how the market reacts to the extremes of this range will define the medium term outlook.
A close above 1.3050 is bullish and would be a 290 pip base pattern. A fall back to break 1.2760 would be bearish and imply 290 pips of additional downside.
For now, there is a mild positive bias still in play, with the recent rebound and positive reaction from yesterday’s low of 1.2865. Resistance is significant around 1.3000 initially and could be a gauge as to a potential test of 1.3050.
The US dollar rally in the wake of the FOMC meeting seems to already have run out of steam.
Lacklustre US data yesterday (jobless claims slightly higher than expected, along with housing data marginally missing) helped to drag the dollar back.
The Fed may have upwardly revised its 2020 growth forecasts but it is now very much on a looser for longer path of monetary policy.
It points towards near term dollar strength still being a chance to sell. It is interesting that the Dollar Index continues to see rallies flounder in the resistance band between 93.50/94.00.
Subsequently, having repelled a potential dollar rebound, forex major pairs are consolidating once more this morning.
This can also be extended to the precious metals, where gold and silver have also found a basis of support again. Equities have a tinge of negative bias after the tech sector once more pulled Wall Street lower, but selling pressure appears to be limited this morning.
There are some marginally constructive noises coming out from the White House (Larry Kudlow) over the prospect of US fiscal support and a $1.5TR package.
This may add a supportive element to risk today, but agreement remains some way off. UK retail sales for August have come in fairly close to expectations early today, with little real impact on sterling.