September 10, 2021 14:14:04

Sterling has ignored this morning’s weaker than expected GDP data with the “pingdemic” acting as a drag on economic activity. In fact, GBP is the best performing major currency this week with the Bank of England Governor Bailey’s comments on Wednesday supporting the pound. He said the minimum bar for tighter monetary settings had been met and the overall economy is progressing in a way that would see a liftoff in rates in 2022.

With the usual mid-month UK data deluge upcoming, we should get a surge in CPI figures due to base effects and a partial heads-up on how the tapering of the furlough scheme on the job market will play out. This seems to be the major risk to the BoE and with it, GBP.

GBP/USD trying to break out

The downtrend since the start of the week has been rebuffed. Yesterday’s move higher took us through a zone of resistance, and now potentially support, around 1.38. Both the 50-day and 200-day SMAs sit here, plus trendline resistance from the June highs.

Today’s high stopped just under last Friday’s top at 1.3891 after the disappointing headline NFP. A strong weekly close will attract more buyers with first initial resistance at the 100-day SMA at 1.3917. Bullish momentum on the MACD and daily RSI is picking up. Support comes in at the 200-day SMA at 1.3821.

GBP/JPY above trendline resistance

Since bottoming out again in the low 1.49s in mid-August, this pair has risen steadily towards 1.52. The past few sessions have seen tight ranges and sideways trading with the daily RSI bumping along the 50 level.

Today has seen buyers come in on the better risk mood and punch above the trendline resistance from the end of May high and the 50-day SMA. Similar to cable, a strong weekly close will embolden bulls to head towards the 100-day SMA at 152.72 ahead of the August highs at 153.31.

If we get a weak close, inital support lies at this week’s low at 151.42. If we do give way there, prices will roll over and potentially head back to the 150 area fairly quickly.