Cable Eyes Recent Highs as Central Bankers Gather in Sintra for the ECB Forum

GBP/USD PRICE, CHARTS AND ANALYSIS:

READ MORE: Gold Weekly Forecast: Bearish Breakout May be Limited as Recession Fears Grow

GBP/USD rallied in Asian trade to a high of around 1.2745 ahead of the European open thanks in part to a softer US Dollar. The pair does appear to be struggling to reach last week’s highs around 1.2850 as rangebound trade has been a constant theme.

Currency Strength Chart: Strongest – AUD, Weakest – USD.

Source: FinancialJuice

UK ECONOMY, TAX CUTS AND PUBLIC SECTOR WAGES

As the UK continues to grapple with runaway inflation, reports have emerged that the Government will not follow through on recommendations of the pay review body regarding public sector wage increases. As discussed by the Chief Secretary to the Treasury John Glen, who told Sky News that Government needs to consider inflation amid fears that a public sector wage hike could add to the ongoing inflation conundrum. The bigger question moving forward is whether the UK is set for another round of public sector strikes should a deal fail to materialize.

The public sector wage dispute is not the only sector facing challenges with Chancellor Jeremy Hunt having to walk back proposed tax cuts as well. The Chancellor cited inflationary risks as the primary reason, with tax cuts likely to spur increased demand and consumption.

US FACTORS AND EVENT RISK

The US dollar meanwhile began the week with a losing day while trading slightly softer this morning as well. Dollar bulls will no doubt be looking at US data later today with Durable Goods Orders and CB Consumer confidence set for release. Given the recent spate of poor data from the Euro Area and the US PMI data last week which showed a slowdown as well the Consumer Confidence data might just stoke some volatility in the US session.

The event of the week however is probably the European Central Bank (ECB) Forum which kicks off in Sintra today. Market participants have largely priced in further rate hikes from the ECB, BoE and the FED, which could result in less volatility and movement in the FX space as Central Bankers deliver their remarks. ECB President Christine Lagarde is expected to kick things off before we hear from ECB policymakers Panetta and Schnabel, Fed Chair Jerome Powell is expected to speak tomorrow.

For all market-moving economic releases and events, see the DailyFX Calendar

TECHNICAL OUTLOOK AND FINAL THOUGHTS

On the daily timeframe GBPUSD has trickled lower since the fresh YTD high print last week, finding support at the previous swing high around the 1.2680 handle. Looking at the intraday potential for GBPUSD and the price action is abit messy down in large part to the spike from the BoE meeting.

Yesterday’s daily doji candle close off support did hint at further upside, whether the early gains are sustainable however remains to be seen. Looking at the H4 Chart below and if you remove the BoE spike cable has been printing lower highs and lower lows with a descending triangle pattern in play.

GBP/USD Daily Chart – June 27, 2023

Source: TradingView

A break and daily candle close below the 1.2680 handle could open up a retest of the 50-day MA at 1.2535 before the 1.2500 level comes into focus. An upside breakout will find he first area of resistance to be the 1.3000 psychological handle before attention shifts to resistance around the 1.3180 level.

Key Intraday Levels to Keep an Eye Out For

Resistance levels:

Key support levels:

• 1.2680
• 1.2535 (50-day MA)
• 1.2500

GBP/USD Four-Hour Chart – June 27, 2023

Source: TradingView

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda