GBP, British Pound, Sterling Price Analysis:
GBP Bounces After Last Week’s Support Breaks
It has so far been a brighter outlay this week for the British Pound as the currency has bounced against both the US Dollar and the Japanese Yen. Last week was marked by weakness in Sterling as sellers pushed each of those pairs down to fresh monthly lows; but at least a portion of that has been offset this week as both GBP/USD and GBP/JPY have thus far put in net gains, even as talk of negative interest rates from the BoE began to circulate through the headlines.
This dynamic isn’t necessarily discounting the prospect of negative interest rates as much as it may be driven by a related theme in risk markets. As discussed on the topic of Gold and then US equities, an interview from FOMC Chair Jerome Powell that was broadcast on Sunday night has helped to add some heat to the current risk rally, and this looks to have taken a toll on both the US Dollar and Japanese Yen getting hit with another bout of weakness; which has helped to buoy both GBP/USD and GBP/JPY.
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In Cable, the big question is whether sellers are going to react to that next spot of lower-high resistance, and there’s a few possible areas where that may develop: From the below chart current support showed up around the 38.2% retracement of the March major move; and the 50% marker from that same study is very nearby, just above the 1.2300 handle. That area helped to provide a couple of spots of support in late-April and then again in early-May. Above that, the 61.8% retracement lines up very closely to the 1.2500 level, producing an element of confluence that may constitute an ‘r2’ zone of resistance.
GBP/USD Four-Hour Price Chart
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX