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Sep 24 - 11:55 AM

GBP/USD - COMMENT- Sterling Resistance By 10-DMA Holds, Recent Lows By 1.36 In View

By Paul Spirgel  —  Sep 24 - 09:46 AM

Sterling slid 0.39% to 1.3668 as Thursday's hawkish BoE-related gains nL1N2QP0ME near 10-DMA resistance at 1.3735 unraveled in the face of Brexit and pandemic-related pressures on the economy, creating an opening for bears to target July 20's low of 1.3573.

Despite UK rate futures hinting the BoE may begin hiking rates as early as its Feb 2022 meeting BOEWATCH, Brexit-related labor shortages in addition to uncertainty surrounding COVID tempered GBP/USD gains.
U.S. rate futures also indicate that Fed hikes may outpace the BoE despite the UK's earlier liftoff.

USD haven flows gained momentum on lingering Evergrande worries and China's crackdown on cryptocurrency, in addition to Fed Chair Jerome Powell's comments Wednesday on Fed asset taper beginning in November 2021, data permitting, and being completed by mid-2022.

GBP/USD neared recent trend lows near 1.3573, trading near 1.36 three times since mid-July, with subsequent bounces shallow and unable to clear the daily cloud.
Thursday's high, at 1.3750, off of Wednesday's post-Fed low by 1.3610, fell short of the daily cloud, indicating lack of resolve by GBP/USD bulls.

GBP/USD's recent failure ahead of the daily cloud base hints bears may be gearing up for a test of July 20's low of 1.3573, eyeing a run at 1.3463's 50% Fib of 1.2676-1.4250, the September 2020-June 2021 rise.
Below 1.3463, a series of daily lows on the way to 200-DMA support by 1.3162 attracts.

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Refinitiv IFR Research/Market Commentary


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