GBP/USD may have fallen below 1.69 on Friday; however this could be a temporary move, as the technical indicators and fundamental back-drop still look supportive for this pair. On the technical side, we think that GBP/USD looks safe as long as it remains above some key support levels including:
- 1.6823 – the May 2nd low.
- 1.6775 – trend line support from July 2013.
- 1.6715 – the 50-day sma.
For now, this just looks like a normal pullback, and we think that the downside could be limited as we lead up to the Bank of England’s Inflation Report next week. There is a chance that the BOE could hint at an earlier rate rise than expected, which could trigger a reversal in GBPUSD. Thus, any further downside in the next couple of sessions could be bought into as the market prepares for Mark Carney and co.
We continue to think that a decisive break above 1.70 remains on the cards and that this is a temporary set-back. 1.7043 – the August 2009 high – remains key resistance.
