Top Story

GBP/USD reaches up to 1.3000 target as sterling continues to pound dollar

The US dollar has been pummeled lately as major central banks from the Bank of Canada to the European Central Bank to the Bank of England have all begun to sound increasingly hawkish, providing hints and indications of future stimulus tapering or interest rate hikes. Though the US Federal Reserve has also been hawkish and is well ahead of other central banks in its monetary tightening cycle, the near-simultaneous shift in several non-US central banks towards a tightening stance has helped boost demand for the Canadian dollar, euro, and British pound at the expense of the US dollar.

This has clearly been seen with both EUR/USD and GBP/USD. EUR/USD has hit more than a one-year high, extending its recent surge well above the key 1.1300 level. As for GBP/USD, price action has just reached the major 1.3000 resistance level on Thursday, a day after Bank of England Governor Mark Carney made some clearly hawkish comments indicating that if the UK employment market remained healthy, “tolerance for above-target inflation falls.” This essentially suggested the potential for an impending BoE interest rate hike, provided job creation remained well-supported and inflation continued to rise.

Despite ongoing Brexit concerns as the UK and European Union negotiate terms of separation and trade agreements, the pound has remained highly resilient. Now that the Bank of England has recently shown potential signs of a hawkish shift in monetary policy, that resilience has transformed into bonafide strength against both the US dollar and yen, at least for the time being.

Technically, as noted, GBP/USD hit a major psychological resistance area at 1.3000 on Thursday. For the past two months, the currency pair has toyed with this level but has not been able to make a clean breakout above it. A false breakout attempt in May resulted in a sharp pullback. Now that price has once again reached this key level, GBP/USD is at a critical technical juncture. If the 1.3000 level holds towards the end of this week and into next week, GBP/USD could see a subsequent pullback towards the 1.2800 support level once again. On any strong breakout above 1.3000, however, the currency pair could extend the current rally potentially towards a 1.3250-area price target.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.