January 27, 2023

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Cable trades up to highest in a week but upside momentum still limited for now

2 min read

GBP/USD is up 0.3% to 1.3873 on the day currently

GBP/USD D1 10-09

That’s the highest since Friday last week as the pound is keeping a good bounce from the lows earlier in the week of around 1.3730.

The rebound comes as the dollar is struggling to keep its footing towards the latter stages of the week but at least the push above 1.3800 did see buyers seize near-term control and are trying to build on that ahead of the weekend.

However, despite the latest bounce, more work needs to be done in order to justify any further upside momentum in cable in the bigger picture.

The BOE may still be primed to hike rates going into next year but that owes more to inflation risks more than anything else, especially when the reopening recovery has already peaked in the summer months and fading going into Q4.

Nonetheless, it does play to rate differentials in the market but it will take some time to manifest, especially with the market also keeping tabs on a similar move by the Fed as policymakers preach flexibility in countering inflation themselves.

For now, cable looks to be targeting resistance from last week’s high @ 1.3892 next but there is sterner resistance from the 100-day moving average (red line) @ 1.3913.

Beyond that, key resistance still lies closer to 1.4000 while downside support is still well defined closer to 1.3600 as price action continues to play within a range since July.

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