GBP Bulls Aim for YTD Peak
As we close out in what has been a volatile week, GBP/USD is on the front foot with the pair nearing its weekly highs having reclaimed the 1.41 handle. That said, closing at such levels puts the YTD peak (1.4235) firmly in focus for next week.
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Market Adopts Buy the Dip Stance as Pivot Holds
The backdrop for the Pound remains favourable as highlighted by the better than expected GDP report. While PM Johnson sticking to his plan to unwind lockdown measures as previously scheduled, despite rising concerns over the Indian Covid variant has seen the market take a “buy the dip” approach in Cable with the 1.40 handle being the key pivot. On the technical front, with dips finding support from 1.40., holding above the 100DMA also keeps risks tilted to the upside in the medium term. Alongside this, positioning is somewhat cleaner for bulls to re-emerge given the recent unwind of net longs by fast money accounts (leveraged funds) ahead of the BoE and Scottish Election.
GBP/USD Chart: Daily Time Frame
EUR/GBP Range Maintained
EUR/GBP: Despite the strong performance in the Pound, EUR/GBP has maintained its well-defined range. Topside resistance at 0.8730 remains firm and tests below 0.8600 have been somewhat short-lived. That said, the continued rangebound price action is likely to persist in the short term, given that the greenback has been the main driver in G10 FX as opposed to idiosyncratic factors. Therefore, the bias would be to fade the range bottom and tops.
Looking ahead to next week, tier 1 UK data will be released and following the large beat in US inflation, BoE watchers will be closely following UK inflation. However, as has been stated by central banks across the globe the inflation spike has been well-telegraphed and is expected to be transitory (a word that will be overused by peak summertime).
Source: Refinitiv, DailyFX