GBP/USD continues to trade around the 1.3100 handle
Yesterday's dip on Brexit worries saw the pair fell to a low of 1.3070 but soon rebounded as Theresa May managed to hold off Brexiteers with yet another narrow victory on the customs amendment. The fall in cable saw it close in on the 38.2 retracement level @ 1.3055 once again - which helped to stall the end of June low - with the 29 June low @ 1.3069 helping to aid buyers with some support levels to lean on.
But even so, sellers remain in control of the pair:
Price continues to trade well below the 100 and 200-hour moving averages, with the pair forming what looks like a double-bottom formation around the 1.3100 handle right now.
The key level holding up the pair is the 21 June support @ 1.3102 with the hourly closes seen so far failing to break below said support level. And that is where buyers are leaning on right now for support. They managed to do so in three previous attempts since a breach below that at the end of June trading.
So, while sellers are still in control the downside looks rather limited for now with support seen @ 1.3102 first followed by that near 1.3055-70 now. It will require a technical break of 1.3055 for the pair to continue to track lower, and with a BOE rate hike on the cards in August it's hard to justify further deterioration in sterling.
That said, there will be two things to watch out for today in the pair:
1. UK inflation report
- This will add to/subtract from expectations of a BOE rate hike in August but right now expectations is skewed towards the upside as a decent report won't derail a BOE rate hike. Only a considerable miss to the downside will cause a repricing in the rate hike odds.
2. Dollar's momentum
- The greenback is closing back in on key levels as mentioned here. That will be a key flow factor in determining direction for the pair prior/after the inflation report hits.
Look out for these two items if you're trading cable today, and hopefully we'll get some good action like the one we saw in yesterday's trading.
