- DXY to resume upside on the US tax bill optimism?
- Yield differential remains USD supportive.
- Brexit headlines, the UK CBI industrial orders data in focus.
The GBP/USD pair is set to extend its overnight recovery mode into the European session, as broad-based USD softness combined with the latest remarks from the UK PM Theresa May remain supportive.
GBP/USD bounces-off 1.3300
The Cable is seen cheering the weekend’s comments from the UK PM Theresa May in the Sunday ‘Telegraph’, citing that “amid all the noise, we are getting on with the (Brexit) job.” Her comments negated the headlines published by the same newspaper that cited – Theresa May faces cabinet row over Brexit as the EU warns there is ‘no way’ the UK can have a bespoke trade deal.
Moreover, ongoing weakness seen in the US dollar against its main competitors, as markets correct a part of Friday’s sharp rebound backed a rally in the US equities amid fresh signs of progress seen on the US tax-cut legislation. The latest move lower in the greenback can be also attributed to the renewed concerns over a Government shutdown, as the December 22nd extended deadline nears.
Later today, the pair is likely to get influenced by the US dynamics, Brexit headlines and UK industrial orders data, while the 10-year US-UK yield differential continues to remain USD supportive.
Omkar Godbole, Analyst at FXStreet noted: “Currently, the 10-year US-UK bond yield differential stands at 122 basis points (bps); the highest level since Jun. 12. The rising yield spread adds credence to the lower highs pattern seen on the daily chart and indicates scope for a drop to 50-day MA of 1.3263. Also, short-term UK-US rate differential crashed to new YTD lows on Friday.”
GBP/USD Technical Levels
According to Karen Jones, Analyst at Commerzbank: “GBP/USD’s intraday Elliott wave counts are turning more negative. While we are unable to rule out a small rebound to the 1.3550 December high, this is looking less likely. Below 1.3300 should be enough to alleviate immediate upside pressure and allow for weakness back to the 1.3184 2016-2017 uptrend.”