GBPUSD: Anticipating the next upswing
GBPUSD popped its head above 1.31 temporarily after a Bank of England Monetary Policy Committee member suggested the UK economy had weathered the Brexit storm better than expected.
It was suggested that further easing may not be required, especially as the sterling depreciation meant the BoE’s inflation target would be met sooner rather than later.
A weaker USD also gave support to GBPUSD as traders concluded there is little chance of any action by the Fed until December, at the earliest.
Based on Fed Funds futures, the probability of 25 basis point rate hike in December is a touch over 50% and a 6% chance of a 50 point hike.
Management and risk description
Sterling has tested and held the 10-Week Triangle support this week (refer daily chart below) and is probably now in the midst of an Elliott Wave recovery toward mathematical resistance at 1.3310/1.3350 (see daily chart) beyond this extends toward classical chart resistance just below the mid 1.3400’s.
Entry: GBPUSD is seen as a buy today at 1.3040/1.3015.
Stop: 1.2978, initially.
Time horizon: At least several days.
GBPUSD weekly chart (click to expand)