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- GBP/USD Technical Strategy: Flat
- Support:1.6996, 1.6960, 1.6897
- Resistance:1.7102, 1.7228, 1.7355
The British Pound pushed to the highest level in nearly five years against the US Dollar, overcoming the 1.70 figure. Near-term resistance is now at 1.7102, the 76.4% Fibonacci expansion, with a break above that on a daily closing basis exposing the 100% level at 1.7228. Alternatively, a reversal below support in the 1.6996-1.7023 area – marked by the 61.8% Fib and the May 6 high – targets the 50% level at 1.6960.
Entering long is a tempting proposition but we will tactically opt to stand aside. The correlation between GBPUSD and the UK-US 2-year bond yield spread is 0.88 (20-day percent change studies), putting monetary policy bets in the driver’s seat. The week ahead is thin on UK news-flow needed to drive further Pound gains while the US docket offers plenty of opportunities for markets to rethink the post-FOMC reaction. With that in mind, we remain flat.
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Daily Chart - Created Using FXCM Marketscope 2.0