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GBPUSD Price Analysis: Potential Recovery with Eyes on BoE

GBPUSD Price Analysis: Potential Recovery with Eyes on BoE

2018-07-23 09:35:00
Justin McQueen, Analyst
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GBPUSD Analysis and News

  • Bank of England Deputy Governor is to speak at 1700GMT
  • OIS Markets currently price in a 73% chance of a hike next week
  • IG client sentiment suggests GBPUSD may reverse higher

Fundamental and Technical Factors to dictate GBP over the next quarter in our Q3 DailyFX Trading Forecasts

GBP to Find Direction from BoE Deputy Governor

The main focus for GBP traders today will be comments from Bank of England rate setter Ben Broadbent at 1700GMT, who is the last scheduled speaker before next week’s Quarterly Inflation Report. The deputy governor will be discussing the future of QE, as a reminder at the last MPC meeting, the central bank brought forward the starting point of its QE unwind, indicating that it would take place once the Bank Rate hits 1.5%. As such, focus will be on discussions regarding the timing and the pace of the QE unwind, while any comments on the recent data in the run up to the QIR next week will also be of note. An upbeat assessment from the deputy governor and no overtly dovish rhetoric will likely provide support for GBP and certainty over a rate hike next week. As it stands, markets are pricing in a 73% chance of a hike at the QIR, which is despite last week’s soft retail sales and inflation data.

Government Recess May Provide Reprieve

Although the Pound remains vulnerable to headline risk centered around Brexit and the turbulent politics in the UK. GBP may find as a reprieve as parliament go into recess on July 24th, which in turn may lower the political noise for the time being. Alongside this, a lot of the negativity surrounding politics has been priced in the Pound, consequently this may allow GBPUSD to base out around 1.29-1.30 for now.

GBP/USD PRICE CHART: 4-Hour Time Frame (June-July 2018)

GBPUSD Price Analysis: Potential Recovery with Eyes on BoE

Chart by IG

GBP Technical Levels

R1: 1.3160 (50% Fibonacci Retracement)

R2: 1.3185 (100DMA)

R3: 1.3230

S1: 1.3111 (38.2% Fibonacci Retracement of 1.3363-1.2957 fall)

S2: 1.3066 (20DMA)

S3: 1.3000 (Psychological Level)

What is the Current Sentiment on GBPUSD?

IG client positioning suggests that the recent changes in sentiment warn that the current GBPUSD price trend may soon reverse higher despite the fact traders remain net-long.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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