GBP/USD: bulls chasing the bid onto the 1.32 handle
- GBP/USD running the bid onto the 1.32 handle.
- Trump's phase-in corporation tax announcements weighing on US yields and the dollar.
- BoE should be a supportive factor for bulls raising stops chasing the bid.
- There is plenty from the US calendar this week.
GBP/USD is battling back for territory on the 1.32 handle as the greenback takes a hit on the ever-changing political climate in the US. Currently, GBP/USD is trading at 1.3209, up 0.57% on the day, having posted a daily high at 1.3217 and low at 1.3123.The recent announcements around the phase-in style 20% corporate tax have rattled Wall Street and US yields with the 10-years now down to 2.3721%, a move affecting the FX space lead by USD/JPY supply from 113.76 to 113.02.
From the European shift, the UK consumer credit and mortgage data were a little stronger than expected. However, markets are positioned for and more or less fully expecting at BoE rate increase Thursday at this point which could be a lifeline to those raising stops chasing the bid onto the 113 handle should there be a correction of this bid.
"No hike would be a significant negative shock for the GBP, though the neutral positioning in the GBP reflected in last week’s IMM data suggest that the GBP would also benefit from a rate increase, even a well-telegraphed one. Brexit concerns remain a restraint on the GBP more broadly," explained analysts at Scotiabank.
Key US data releases for the greenback this week:
- ADP Employment Change
- ISM Manufacturing
- FOMC Rate Decision (FOMC: No change in policy is expected - BBH) (Upper Bound) FOMC Rate Decision (Lower Bound) Initial Jobless Claims
- Change in Nonfarm payrolls Unemployment Rate
- Average hourly Earnings MoM Average Weekly hours
- ISM Non-Manufacturing
GBP/USD levels
- Support levels: 1.3180, 1.3145 and 1.3100.
- Resistance levels: 1.3220, 1.3260 and 1.3300.
Technically, Valeria Bednarik, chief analyst at FXStreet explained that the GBP/USD pair is up for the day, but below the 1.3220 level, which stands for the 38.2% retracement of the early October rally, also reluctant to surpass a horizontal 200 EMA in the 4 hours chart.
"In the mentioned time frame," she added,"technical indicators aim modestly higher within positive territory, while the price is a handful of pips above a directionless 20 SMA, offering a neutral-to-bullish short-term stance. Beyond 1.3220, the pair has scope to extend its recovery up to the 1.3260 level, while beyond this last, and approach to the 1.3300 figure seems likely. Below 1.3185, on the other hand, the 50% retracement of the same rally the risk turns back towards the downside."