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GBP/USD Gains Before BOE Governor's Parliament Testimony - Capital Street FX

24-May
15:00 IST

On Tuesday, the British Pound rose against almost all of its top counterparts for the first time in three days after the results of a poll published late Monday showed that the “Remain” campaign of “Brexit” is gaining strength. According to statistics, 55% of respondents, that participated in the survey, support Britain sticking with the European Union. Meanwhile, the “Exit” vote was supported by 42% of respondents.

At the parliament’s treasury committee testimony today, the BOE Governor and several Monetary Policy Committee members shall be answering questions on inflation and the economic outlook before Parliament’s Treasury Select Committee. The market is focussed on the opinions of key policy makers on what may happen if voters opt for the UK to leave the EU in the upcoming referendum on June 23.

Overall, the BOE position is already well-known. The central bank has stayed out of the debate about the costs and benefits of EU membership over the long term and has mainly focused on the negative growth and market stability implications on the economic structure  of the UK instead. Traders may still interpret their ability to toe this line convincingly, as indirect support to the “Remain” campaign, which may send the Sterling higher.

Although the pound sterling is in recovery mode against the US dollar at present, the up move remains capped, as renewed fears over a Brexit vote and its impact on the overall UK economy continues to weigh on investors’ minds and US dollar strength also keeps the gains in check.

Today, a light US economic calendar puts focus on Fed speakers. The greenback pared some of its recent losses, as a string of comments on Monday by Federal Reserve officials, and the minutes from the previous FOMC meeting have further increased the likelihood of a rate hike in June or July, with even more hawkish sentiments for the next year, given U.S. economic strength. This has helped revive the dollar, but cooled the appetite for riskier assets.

The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen’s speech on Friday, a day on which investors will also see the second estimate of US first-quarter growth. Markets also await comments from other Fed officials this week, as well as data on new home sales, durable goods orders and consumer sentiment.

gbpusd d1

Fig. GBPUSD D1 Technical Chart

After tracing a two-day down move to as low as 1.44378, the pair is ticking up again, breaking level 23.6% of the Fibonacci retracement. RSI (14) is at 58.2338, indicating that the pair is entering a bullish market. The signal trend indicator has suggested a long position since April 21 by a green arrow under the price chart. The level 0 of Fibonacci retracement (1.47691) is anticipated to be tested.

Trade suggestion

Buy at 1.45847, Stop loss at 1.44541, Take profit at 1.47345

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