GBPUSD is currently moving inside a rising wedge pattern and is testing the resistance around the 1.5700 major psychological mark. If this ceiling holds, the pair could make a move back towards support at the 1.5600-1.5650 levels around the moving averages.
Stochastic is moving down from the overbought zone, signaling that a selloff might take place as selling pressure picks up. RSI is on middle ground but also seems to be on the move down, confirming that pound bears are in control.
However, the 100 SMA is above the 200 SMA, suggesting that the longer-term uptrend is likely to carry on. With that, an upside break past the wedge resistance might be a possibility and the resulting breakout could last by around 350 pips or the same height as the wedge formation.
GBPUSD Fundamental Factors
Both the BOE and the Fed are hawkish central banks, although the timing of their rate hikes are still under debate. The recent BOE minutes and Inflation Report hearings revealed that not all policymakers are eager to tighten monetary policy, with some voicing out concerns about inflation. Similarly, the FOMC minutes suggested that the timing of the liftoff might be delayed past September since commodity prices could face another leg lower.
Risk sentiment favors the lower-yielding US dollar at the moment, as the selloff in global equity markets could prompt a flight to safety. However, data from the UK economy has been particularly strong, suggesting that the pound can have a fighting chance.
There are no reports lined up from both economies today, with only a testimony by FOMC member Lockhart lined up. Keep in mind that the low liquidity during these summer months means a higher possibility of volatile moves, as traders might have a knee-jerk reaction to strong statements. Indications that Lockhart might soon vote for a rate hike could be enough to boost the US dollar.
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