All hail the mighty Pound! GBPUSD posted fresh 19 month highs during today’s session, after breaking the 1.40 level for the first time overnight in the same period. This afternoon has seen a continued US dollar weakness story add to the move, with Cable breezing through yesterday’s highs. The US dollar index saw a similar inverse move, but not as aggressive as the dollar sell-off saw EURUSD, USDJPY as well as GBPUSD all post strong moves.
The rumors of a softer stance from Belgium have helped the move from a Pound perspective, but this move is undoubtedly a US dollar decline. The US dollar index has now broken below some key support levels on the hourly chart and hits its lowest level since 2014 at 90.15. This move yet again highlights that despite the strength of the equity markets on Wall Street since Trump took office we have seen a similar negativity on the greenback, with dollar weakness becoming a hallmark of the President first 12 months.
GBPUSD has reaped the benefits of the lower US dollar as well as a clearing picture (although still not that clear) around Brexit. The pair has recovered so aggressively from the lows seen after Brexit, and the flash crash down at 1.1815. The issue is where do we go from here as on the 23 June 2016 (referendum day) we say Sterling plunge lower printing down at 1.3226from highs around the 1.5000 level. That is now a huge gap to fill, and to pinpoint levels in.
The move could well hold up to a certain degree as we move into the later part of the US trading session, and the move above 1.4020 could well have triggered a number of stops that could drive us back down. Looking for levels is difficult and takes us out to the monthly chart, and a 23.6% fib retracement from highs back in June 2007 to Brexit lows. That 23.6% fib gives us a level at 1.4080 – 1.4100.
Such is the way of these markets currently the Fed Gov nominee Goodfriend’s remarks on the current Fed position is seeing the dollar recover a little and helped to push that Dollar index back above the lows.
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