GBP Riding Rising Rate Expectations; USD Hasn’t Bottomed Yet

Talking Points:

– After a BOE pronounced that markets were underpricing a contingency of a rate arise in a subsequent few months, traders have started to drag brazen expectations of a BOE rate travel in November.

– DXY Index tested a daily 21-EMA again this week, though still has not sealed above it given Jun 22.

Retail throng positioning has eased, though stays nearby impassioned levels in a few USD-pairs.

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With a Bank of England observant yesterday that markets were underpricing a contingency of a rate arise in a entrance months, a British Pound has been given new life, mountainous to uninformed 2017 highs contra a Japanese Yen, Swiss Franc, and US Dollar.

A thespian change in rates pricing has been a pushing cause behind a moves in GBP/CHF, GBP/JPY, and GBP/USD. Whereas during a start of this week rates markets were pricing in approximately a one-in-five possibility of a 25-bps travel during a BOE’s assembly in November, currently they’ve soared to 64%, providing all a ammunition a British Pound indispensable to pierce to a topside.

The mutli-month exquisite triangle dermatitis in GBP/CHF and a multi-month descending triangle dermatitis in GBP/JPY advise that British Pound strength will stay in practice and is not usually a flitting fad. With a subsequent BOE assembly not until Nov 2, there is copiousness of time for marketplace pricing to change some-more and expostulate a GBP-crosses further.

Elsewhere, one of a large focuses this week was on monitoring a US Dollar for signs that a bottom could be developing. Given cost movement seen this week, It’s still distant too shortly to contend that a low is in place for a US Dollar.

The DXY Index once again tested a daily 21-EMA this week, usually to destroy to tighten above it; it hasn’t sealed above a daily 21-EMA given Jun 22. Aside from a daily 21-EMA (now during 92.43), traders might wish to wait for serve acknowledgment for a DXY Index low until a Aug 25 bearish outward engulfing bar is privileged out during 93.44.

See a above video for technical considerations in a DXY Index, EUR/USD, GBP/USD, USD/JPY, USD/CHF, GBP/CHF, and Gold.

Read more: Webinar: Live Event Coverage: BOE Rate Decision

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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