The Pound climbed to a 20-day high above 1.3400 against the Dollar as the greenback’s rally paused and low volatility drew investors back into higher-yielding currencies. Analysts see dense resistance ahead, with Wednesday’s Federal Reserve minutes the next test.
The Pound to Dollar exchange rate (GBP/USD) posted a 20-day high fractionally above the 1.34 level before trading around 1.3385. Calm markets and subdued volatility encouraged demand for higher-yielding currencies, while easing UK political uncertainty helped investors rebuild long Pound positions.
Risk appetite held steady as overall volatility stayed low. In that environment, the relatively high yields offered by both the Dollar and the Pound provided net support to each currency.
Resistance stacks up above 1.34
The advance now runs into a cluster of technical barriers. UOB flagged strong resistance just above 1.34 and said the next level at 1.3445 is likely out of reach on current momentum, adding that GBP must hold above 1.3350 to sustain the move.
Scotiabank was more constructive, noting that momentum appears to be pushing further into bullish territory. Even so, the bank pointed to dense resistance at 1.3420, 1.3450, 1.3500 and 1.3520 before 1.3600 comes into view.
Dollar cools ahead of Fed minutes
The dollar index eased to around 100.60 after hitting 13-month highs near 101.50 last week. Minutes from June’s Federal Reserve meeting, where rates were held at 3.75% alongside relatively hawkish comments from new Chair Warsh, are due Wednesday.
ING expects little change, arguing that a dovish surprise is unlikely and the index can stay closer to 101.0 than 100.0. According to Scotiabank: “near-term risks are tilted towards a little more USD weakness overall”, with the bank seeing signs the dollar’s gains may be peaking near support around 100.5.
Domestically, with Burnham expected to be confirmed as new Prime Minister, markets are watching for the next Chancellor and the direction of fiscal policy. Scotiabank cited the OBR’s warning over the £100bn cost of stabilizing national debt near 95% of GDP.
Source: CurrencyNews.co.uk
Trading involves risk.
Risk Disclaimer
