GBPUSD has sold off recently but is still gradually trading higher on the 1-hour time frame. A rising channel can be seen connecting the latest lows and highs of price action.
Price is currently testing the channel support and might be due for a bounce back to the top. The 200 SMA lines up with the bottom of the channel at the 1.4400-1.4450 psychological levels, which might keep losses in check. If a rally takes place, a test of the 1.4700 major psychological resistance could happen.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. However, stochastic and RSI are both on the move down, hinting at a buildup in bearish pressure. If sellers take over, a break of the channel support could be seen.
Event risks for this setup include Fed Chairperson Yellen’s speech later today, as she might drop more hints on when the next Fed rate hike might take place. Dovish remarks could mean losses for the dollar while upbeat comments could spur gains.
Another potential catalyst is the UK manufacturing production report, which might print a flat reading. Previous reports have come in weaker than expected so there’s a good possibility of a downside surprise.
Risk sentiment appears to favor the lower-yielding dollar at the moment as traders are also pricing in lower odds of a BOE rate hike for this year or early next year. Recall that their latest policy meeting minutes showed that officials voted unanimously to keep rates unchanged this time.
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