GBP/USD Cable hits resistance
The GBP/USD pair has rallied rather significantly during the trading session on Tuesday again, but now is starting to face a serious resistance barrier in the form of the 1.32 handle. Ultimately, this is a pair that is going to continue to have a lot of headline risk around it, but ultimately one should keep in mind that this is a pair that is very emotional right now, and of course has a lot driving it for both sides of the Atlantic Ocean.
After Teresa May suggested that she was opened to the possibility of a Brexit delay, British pound got yet another boost higher. Quite frankly, this is a pair that has bottomed longer-term, and therefore it’s very unlikely that any sustained move to the downside happens. When I look at this chart, I clearly recognize that the 1.33 level above is resistance, and therefore it’s going to be difficult to go higher in the short term.
Enter Jerome Powell
Luckily for the British pound, the Federal Reserve chairman Jerome Powell is speaking in front of Congress during the next two days. In the Humphrey Hawkins testimony, they will be paying attention to whether or not he is likely to be more of a double or a hawk going forward. Ultimately, the Federal Reserve has recently changed its tune when it comes to monetary policy, and it looks as if we may see more of a dovish stance going into the future. If that’s going to be the case, it’s very likely this could be the catalyst to push Cable above 1.33 going forward. If they do in fact delay Brexit, it’s almost a sure thing.
In the meantime…
There is still the potential for a short-term pullback, but those should be thought of as buying opportunities. Over the next 48 hours, you can expect the trading community around the world to parse the words of the chairman very carefully. That being said, we already know that he is changing his tune, and it’s very likely that we will continue to see more of that dovish stance, as the greenback is rolling over against most currencies. We remain bullish of GBP/USD but recognize we may need to pull back slightly to build up the necessary momentum to completely break out.