December 8, 2022

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Cable gains stall at 1.3800 for the time being

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GBP/USD sees upside move stall a little so far on the day

GBP/USD H1 26-07

The pair has made some good progress as price continues its rebound close to the 4 February low @ 1.3566. The low last week touched 1.3572 and since then, cable has regained solid ground despite a nudge lower on Friday.

The dollar is in a mixed spot today but is mostly lower so perhaps that is helping with the slight nudge in cable towards 1.3800. This comes as US 10-year real yields slumped to an all-time low of -1.127% in European morning trade.

As for the pound, it has shown much resilience from a technical perspective as it bounces off the 4 February low @ 1.3566 but the 1.3900 level arguably poses a relatively key resistance level for the time being.

As such, the gains in the past few days are decent but they aren’t suggestive of a major turnaround back towards 1.4000 and above just yet.

Adding to that is some worries surrounding the UK economic recovery, in which rising virus cases and supply chain disruptions/staff shortages have already played a part in weighing on business conditions in July; going off by the PMI readings at least.

If there are more disappointing data points to follow, that will put the BOE in a real pickle especially since inflation pressures are mounting.

But I would argue that the recovery comes first and if conditions for that are threatened, it will be tough for the central bank not to play things more cautiously.

In turn, that’s not exactly a strong tailwind the pound can get behind.

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