As the markets await the outcome of the Federal Open Market Committee (FOMC) meeting today evening, GBP is on a sideline keenly waiting to hear the outcome of the Federal Meeting.
Sterling has retraced its path up again after the last week’s sell off, helped by London and Brussels movement towards Brexit deal. Last week PM Theresa May’s plan for future trade ties were rebuffed by the European Union (EU).
The volatility in pound is expected to rise in the coming months – October and November when the EU Summit rolls in. Mid November would be the last chance for signing the deal before the March 2019 Brexit date.
The UK Q2 GDP data is due on Friday, the year on year data is expected at 1.3 percent. Apart from this UK is mostly dull on the economic indicator front. US Q2 GDP (qoq) data due tomorrow would also show if the Fed decision tonight would be justified in a stronger US economy.
Technically, the Cable is trading around the 50% Fibonacci retracement level at 1.31860 and will attempt to go past 76.4% level at 1.33626 last seen touching in Jul ’18. But before that the psychological mark of 1.33 has to be crossed convincingly. The momentum indicator RSI is at 58, towards an uptrend though MACD is almost at the signal line, giving a neutral signal. The current rate is well within the trend channel lines (marked in red).
In the near term the pair is expected to be sidelined with next 2 months a make-or-break for Brexit and UK PM Theresa May.
As indicated in our earlier report (link below) on GBP, the long term direction of the currency is bullish towards 1.36-1.37