The British pound is giving away gains on Thursday’s US trading session, with the pair dropping back to levels below 1.3700 after having peaked at a three-week high at 1.3730. On daily charts, however, cable remains positive, above the top of the recent trading range, at 1.3650/70. The sterling has been showing strength over the last two weeks, as the market is pricing an interest rate hike by the Bank of England early next year. With inflation accelerating at levels almost twice the Bank’s target for price stability, BoE officials are starting to openly suggest the possibility of accelerating the monetary policy normalization plan.Beyond that, the recent European Union's proposal to slash custom checks on British Products to Northern Ireland has eased concerns about another UK-EU dispute on the NI border, which has provided a fresh impulse to the sterling.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

On the downside, 1.3680 (middle line of the regression channel) is the first support before 1.3640 (lower line of the regression channel) and 1.3600 (psychological level/100-period SMA).

From a broader perspective, the FX analysis team at UOB remains positive on the pound, as long as the pair remains above 1.3595: “We have expected GBP to trade within a 1.3500/1.3680 range since early this week (see annotations in the chart below).GBP rose strongly yesterday and the advance has gathered momentum. From here, GBP is likely to head higher to 1.3715. A break of 1.3715 would shift the focus to 1.3750. Only a break of the ‘strong support’ (currently at 1.3595) would indicate that GBP is not ready to head higher.”

GBPUSD

Oct 14 2021