GBP/USD: capped by the 200 4hr SMA

• GBP/USD making tracks to test the 200 4hr SMA
• BoE to offer a dovish hike scenario?

Currently, GBP/USD is trading at 1.3272, up 0.48% on the day, having posted a daily high at 1.3290 and low at 1.3192.

GBP/USD has been capped after a strong rally from 1.32 the figure with a brief breach of the 1.3280 level and looking to test the 200 SMA on the 4hr chart.  The greenback continues to look fragile while holding on to 94.50 by the skin of its teeth and sterling is supported on BoE prospects with a 25bps tightening more or less fully factored in now. "The BoE will have to act and talk hawkishly to keep the GBP supported we feel," argued analysts at Scotiabank.

GBP/USD bulls need favourable Brexit backing

Uk Brexit Sec. Davis: UK isn’t holding up Brexit process

"An optimistic GBP outlook does require having bold faith in politicians to follow the economically rational path of a mutual divorce agreement with a status-quo transitional period until trade talks are over.  With the ‘Carney Put’ in place, we are more comfortable in enlisting such faith in politicians and retain a constructive GBP outlook (GBP/$ 1-month target 1.35)."

GBP/USD levels

"We continue to feel that spot needs to break either side of 1.30/1.33 to extend directionally," the analysts at Scotiabank explained. Meanwhile, directly overhead lies the recent October high and the 50% retracement at 1.3338/43. "While capped here, we will maintain a negative bias and target the 1.2995 2016-2017 uptrend line. This is the break down point to the 1.2830 38.2% retracement and the 1.2575 50% retracement. The currency pair has recently failed at the 1.3515 2014- 2017 downtrend and is thus viewed negatively," noted analysts at Commerzbank.