GBPUSD, H1
Cable has rallied on the back of the softer post-U.S. jobs report dollar. The pair today logged a one-week high of 1.2240. The UK government is on the verge of triggering Article 50 of the Lisbon Treaty to start the process of leaving the EU as soon as tomorrow. The government should have sufficient votes for the Brexit bill be passed by MPs today, and a follow-up vote in the House of Lords tomorrow would also likely be approved. This won’t be a surprise for markets, but the focus will quickly turn to the response of EU negotiators. The pound has been under performing over the last two weeks, though has rallied today, which is reported to be position squaring as recent futures data suggested that speculative accounts had run up a sizable net short exposure. The CFTC report on Friday showed that as of close of business on Tuesday March 7, 2017 there was an increase in net short positions on the GBP of 15,000 contracts for the week up to 81,000 from 66,000.
UK economic data has been showing the economy to have entered stagnation as rising prices squeeze household spending power. This backdrop may see the BoE turn slightly move dovish in rhetoric, albeit while retaining a neutral policy stance, at this week’s MPC meeting (announcement and minutes due Thursday). The 1 hour chart has strong resistance at 1.2215 and a support zone between 1.2198 and 121.80. A sustained break of the key higher time frame moving average around 1.2215 by the lower time frame moving average is likely to see a move higher towards the daily high at 1.2240.
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Stuart Cowell
Senior Market Analyst
HotForex
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