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May 04 - 11:55 AM

GBP/USD - COMMENT-Sterling Bulls See Red Above 1.3900, Reduce Longs Ahead Of BoE

By Paul Spirgel  —  May 04 - 10:39 AM

Sterling fell on Tuesday, outpacing other majors on the way down against the dollar as UK bank holiday gains above 1.3900 unraveled ahead of a full week of U.S. payrolls and BoE policy making.

Cable bottomed at 1.3840, near Fib support by 1.3839 nL1N2MR0O2.
Sterling weakness is outpacing other majors as Monday's holiday gains above 1.3900 unravel and should remain capping by the 30-day Bolli at 1.3990.
The Bolli envelope spanning 1.3665-1.3990 has constrained GBP/USD since late March, more recently holding between the 30-DMA at 1.3828 and the upper 30-day Bolli.

With little expectation of a BoE rate change, sterling bulls hope for QE tapering akin to Canada's recent adjustment nL1N2MF1HX, which would boost GBP/USD above resistance at the upper 30-day Bolli and Feb.
26's 1.4021 high, opening the way toward 2021's peak at 1.4240.

A more dovish hold would exacerbate recent selling and test the lower end of sterling's recent range below the 30-DMA at 1.3828, putting April 16's low at 1.3717 and the lower 30-day Bolli at 1.3670 in sharper focus.

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Source:
Refinitiv IFR Research/Market Commentary

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