Will GBP/USD Break 1.50?

Will GBP/USD Break 1.50?

Will GBP/USD Break 1.50?

The latest rally in GBP/USD is nothing more than a dead cat bounce and while this week’s U.K. employment report could drive the pair higher, we will view this move as an opportunity to sell at a higher level. There have been more upside than downside surprises in U.K. data and given the strength in the employment component of the PMIs, Wednesday’s labor market numbers could also surprise to the upside. However the best trades are the ones where we go with the central bank and not against them. The Bank of England has made it clear that they are worried about the U.K.’s economy and are in no position to raise interest rates. At the same time, the latest U.S. jobs number satisfies the Fed’s preconditions for raising interest rates and the strong prospect of tightening next month should extend the greenback’s gains over the next few weeks. As such we look to sell any rallies in GBP/USD for a move to 1.50 and lower.

Technically, last week’s swing low of 1.5027 is near term support for GBP/USD but the key support level is 1.50. There’s nothing significant that will stop the currency pair from reaching that level. If 1.50 is breached the next stop for the pair should be the 76.4% Fib retracement of the April to June rally at 1.4880. Should GBP/USD rally, resistance for the pair is at the 50% Fib of the same move at 1.5242.

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