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British Pound (GBP) Latest: GBP/USD Hits a 4-Month High as the US Dollar Slumps Further

British Pound (GBP) Latest: GBP/USD Hits a 4-Month High as the US Dollar Slumps Further

Nick Cawley, Strategist

GBP/USD Price, Chart and Analysis:

  • GBP/USD at a multi-month high, driven by US dollar weakness.
  • EU/UK informal trade talks resume.

GBP/USD is pressing against levels seen in March this year, primarily due to ongoing weakness in the greenback. The US dollar basket (DXY) is touching lows seen nearly two years ago as sellers continue to control price action ahead of this Wednesday’s FOMC meeting. The Fed are likely to continue their dovish rhetoric and actions as renewed COVID-19 outbreaks in the US make an economic recovery harder to call. The US government is preparing another round of direct stimulus with a further $1,200 check for every American taxpayer expected to be signed off soon in a further effort to boost the economy. The Fed is expected to signal Wednesday that they remain willing and able to provide the economy with as much liquidity as is required, an action that will cause the greenback to weaken further against a range of currencies.

There is little in the way of significant economic data out in the UK this week with mortgage approvals the only real release of note. For all market moving data releases and events see the DailyFX Economic Calendar

The EU and UK will have informal trade talks this week with both sides unwilling as yet to shift to enable talks to progress. While both negotiators are playing a blame game, the mood music has picked up in the last 1-2 weeks with some political commentators seeing an improvement in the talks, albeit marginally. Sterling remains vulnerable to a sell-off if both parties remain at an impasse, suggesting that cable may not be fully pricing-in any bad news. The daily chart does show a bullish move though with the pair back above the 200-dma for the first time in over four months. If the pair can settle above the June 10 high at 1.2815, and move out of overbought territory, a full re-trace back to the March 9 high at 1.3200 cannot be ruled out in the medium-term. Traders should remain cautious as there are still a lot of moving parts in GBP/USD.

Introduction to Technical Analysis

GBP/USD Daily Price Chart (January – July 27, 2020)

British Pound (GBP) Latest: GBP/USD Hits a 4-Month High as the US Dollar Slumps Further

Traders of all levels and abilities will find something to help them make more informed decisions in the new and improved DailyFX Trading Education Centre

What is your view on Sterling – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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