July 30, 2021 13:41:10

Sterling has enjoyed a good couple of weeks rising eight sessions in the past nine. While the safe haven currencies are the top performing majors on the month, the pound is next best and has confounded the sceptics as the spread of the delta variant and case counts have declined. Cable recently extended post-FOMC gains, hitting its highest point since 24 May.

It seems positioning for the BoE meeting next week has already kicked in with some expecting a hawkish tilt by the MPC. Two voters recent bullish comments means there are dissenters in the ranks, as this is not yet committee consensus. But the majority of analysts think there will be no policy changes, particularly due to variants adding a little more uncertainty to the growth outlook. So, while inflation forecasts will be raised, there seems to be little requirement for the bank to talk timelines with regard to ending the QE programme early. Cautious optimism seems to be the way forward.

Weekly GBP/USD Chart: Clear rejection of key support

We wrote a few weeks ago about GBP building a base and the weekly bullish pin bar candle that closed last week showed a sharp rebuff of lower prices. The lower wick shows the bears were in control earlier in the period, but they were eventually overcome by the bulls with a strong close near the highs of the week. The bounce back has also reinforced the 1.3668/70 support level. The down trendline from the May highs now looks to have been broken with prices heading for 1.40 in the near term.

Daily GBP/USD Chart: Broader trends still positive

The current MACD is inevitably hugely bullish with GBP recently crossing its 50-day and 100-day SMAs. But cable has now stalled and is trading exactly on the former at 1.3944. Consolidation might be expected with the run we’ve had, with firm resistance also around 1.40 where a Fib level sits too. Support is at yesterday’s low at 1.3935 followed by 1.3850.