Pound Sterling has emerged back above the 1.30 level against the US Dollar following the US Fed's policy meeting overnight. And more gains could now be in store.
GBP/USD’s short-term down-trend took the pair below the key 1.30 marker on Wednesday the 21st September.
However, the FOMC meeting held at 7PM UK time proved to be a bit of a kick to the Dollar which has since fallen back allowing GBP/USD to sneak back above the 1.30 threshold.
The US Fed maintained the line that an interest rate rise was likely in December, however, the trajectory of further interest rate rises through the course of 2017 was lower.
This flatter curve is what took the wind out of the Dollar's sails.
The move above above 1.30 on the inter-bank market means your bank account is likely offering GBP/USD payments between 1.2690 and 1.26.
Independent money tranfer specialists are seen offering rates approaching 1.29.
More Gains Possible
So where is GBP/USD headed now?
According to analyst Robin Wilkins at Lloyds Bank, further advances in GBP/USD can be expeted:
"With the Fed still on hold and watching we have seen the key triangle support region around 1.2950 hold. We are now looking for a gradual move back towards the range resistance, with ~1.3200 pivot within this process."
Intra-day support lies at 1.3010-1.2990.
Medium-term Lloyds retain a bias for an eventual move towards 1.3650-1.3850, although the coming week or so price action will help reinforce that view, or not.
Analysts Got it Right
We wrote yesterday how a number of analysts saw the GBP/USD decline as nearing its end.
It appears they were right.
Analyst Quek Ser Leang at UOB noted:
“GBP appears to be running ahead of itself, downward momentum remains strong and further extension to 1.2950 would not be surprising."
OCBC’s Emmanuel Ng, earmarks 1.2900 as a floor, whilst a lack of data on Tuesday is likely to keep the market range-bound.
“There is little from the domestic calendar to distract today and the pair may remain bouncing in recent ranges.
“First resistance is expected towards the 55-day MA (1.3149) with 1.2900 seen cushioning for now,” notes Ng.
Resistance at 1.3100 appears to be noted as key in capping upside and determining the trend – whilst below it there being a chance of more downside; if above, the outlook could turn more bullish.
“While under 1.3095/1.3140, a move lower towards 1.2990-1.2925 is possible. But, at this stage, we expect that area to hold. A rally back above 1.3140 suggests a higher low is in place for a re-test of 1.3350,” suggests Lloyds Commercial Banking.
Our own analysis is similar – we see the possibility of a move down to 1.2935 if there is a confirming break below the current 1.2990 lows.
However, at 1.2935 support from a trend-line linking former lows would kick in and probably limit more downside.
We also see upside capped in the 1.31s by the pivot at 1.3140.
Given the very-short-term trend is down we forecast more of it to come.
A break clearly below the August lows at 1.2863 would confirm a further bearish phase out of the range and down to a target at 1.2700.