The low last week hit 1.2411 but the pair managed to hold a weekly close back above 1.2500 still. The dollar has been rampant as of late and is holding its own as we get to the FOMC meeting later today. That is the first key risk event to watch for the pair this week, followed by the BOE meeting tomorrow.
For now, we are seeing sellers flirt with the technicals again in a push just below 1.2500. The trading range today is relatively narrow but it is tough to deny that sellers are looking poised to resume the downtrend from the break below 1.3000 last month.
If the Fed sticks with its guns and lays down a more hawkish undertone to follow in the meetings in June and July, that could be enough to fuel a further run in the dollar.
In that instance, cable is at risk of a further breakdown potentially towards 1.2000 - even if conditions may be oversold - unless the BOE comes up big tomorrow (unlikely though).
The spot to watch for a further dollar rally will be the bond market. If 10-year Treasury yields seal a firm break above 3%, that's a strong trigger for a broader move in the greenback.
