July 28, 2021 15:17:21
GBP is the best performing major currency this week as the “English Experiment” confounds the doomsday sceptics who have been anticipating more Covid waves and potentially more lockdowns. Sterling is also slightly detached from the current global risk dynamics with the Chinese stock rout helping and hindering the more classic risk off/on currencies. Next week’s Bank of England meeting should see the MPC stick to their (slightly dovish) guns with the end of the government’s furlough scheme in September being a key marker for a more optimistic outlook.
EUR/GBP testing four-month lows
While cable and EUR/USD will be affected by any FOMC noise this evening, the latter has struggled to move above 1.18 whereas GBP has broken through the short term down channel. This has pushed EUR/GBP to previous July lows at 0.8503 and just below long-term trendline support. All eyes are now on a retest of the cycle trough from April at 0.8471 if we can close strongly down here. With short positioning outweighing GBP longs for the first time this year, this more balanced picture than in the previous few months may also see more hawkish speculation around the BoE meeting.
GBP/NZD still room to push higher
We wrote about the high chance of more upside in GBP/AUD a few weeks back and this is now trading in overbought territory. On the other hand, GBP/NZD has only made a strong break higher over the last couple of sessions. Prices have been trading in a steady upward channel since the December lows. The series of higher highs and lows was broken at the end of March, but prices retraced back into the bullish channel which is still holding pretty well. The bulls now look to be firmly in charge after hitting levels not seen since August last year. The highs from that month sit at 2.0270/71 and with momentum indicators not overbought, buyers will aim for the top of the channel and this higher level. Late June and mid-July peaks around 1.9957/61 offer near-term support if we cannot close firmly above the June and July highs around 1.99/5762.
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