GBP/USD – Sell at 1.2300

GBP/USD – Sell at 1.2300

GBP/USD – Sell at 1.2300

This is a big week for the British pound and the recent strength in sterling could fade quickly given the right circumstances. Today’s rally was driven by a mild pullback in the U.S. dollar and relief that Bank of England Governor Carney won’t be stepping down anytime soon. Sterling has been vulnerable to a short squeeze and today’s news on Carney provided the catalyst. Unfortunately fundamentals will return to play in the next 24 hours. The U.K.’s PMI manufacturing report is scheduled for release tomorrow and we are looking for a softer reading given the sharp drop in the CBI industrial trends survey. The Bank of England monetary policy statement and Quarterly Inflation Report are also likely to reflect the central bank’s ongoing concerns about Brexit.

Technically GBP/USD could hit rise a bit more to the 20-day SMA near 1.2300 before finding resistance although the October 27th high of 1.2272 will be the first barrier. Either way, we expect the rally in sterling to run out of steam given this week’s event risks. However if GBP/USD breaks above 1.2335, the currency pair could shoot for 1.2450.

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