GBP/USD: Gains on Offer Still Possible as FOMC Doves Gain Upper Hand
The pound to dollar exchange rate continues to trade with a positive bias ensuring GBPUSD enters the weekend on the front-foot.
The pound is sitting just below the resistance zone at 1.5670 – this area has past form in that it has halted gains in GBPUSD on many an occasion in 2015.
Could this be about to happen again? If the British pound does indeed capitulate then look for declines towards 1.5470.
We have just published a piece that warns of substantial US dollar strength ahead, so from a fundamental perspective there is a chance that upside momentum will ultimately be capped.
For the team at brokerage Easy Forex the 1.5655 level is key as it forms a pivot – if the GBPUSD remains above here then further gains are expected.
Targets are suggested at 1.5725 and then 1.577 in extension.
Latest Pound / US Dollar Exchange Rates
  | Live: 1.3332▲ + 0.05%12 Month Best:1.3789 |
*Your Bank's Retail Rate
| 1.2879 - 1.2932 |
**Independent Specialist | 1.3146 - 1.3199 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Should the level give way then “look further downside with 1.563 & 1.56 as targets.”
Striking a similar tone is Commerzbank’s Karen Jones who notes that, “GBP/USD continues to probe the end of July high at 1.5690. Currently we remain unable to rule out further strength to the 200 week moving average at 1.5864 and possibly the 1.5930 June high.”
According to Jones failure here will see a slide back to the1.5424 current August low and the 200 day moving average at 1.5371. For a more negative stance to be adopted at this stage we will need a close below the July low at 1.5330.
“Meanwhile further upside probes cannot be ruled out,” says the Commerzbank analyst.
FOMC Doves Gain Upper Hand
The all-round weakness in the dollar exchange rate complex stems from the realisation that the September interest rate rise at the Federal Reserve may not come.
The minutes of the July 28-29 FOMC meeting showed participants remained undetermined on the timing of the first rate hike.
"In our view, recent developments on the international front (i.e., China’s devaluation of the yuan) together with a renewed decline in commodity prices are certainly giving the doves the upper hand. It appears that the odds of a September rate hike have significantly diminished, at least for the time being. We still think that a Fed rate hike is more likely in October if financial conditions stabilise," says a note from National Bank Financial Markets, a division of National Bank of Canada.
More market participants will continue to cut exposure to the dollar if this view gains more traction.
