June 1 2021
We start a new month and the poor US Dollar gets an early beating. The GBPUSD is leading the charge today in Asian trading. I was mildly surprised to see such an aggressive move on the back of a London and New York holiday.
Sellers at 1.4220 to 1.4240 has been cleared out, taking us to the cusp of making new multi month and possibly multi year highs.
Buyers will be found on dips and provided we hold 1.4200 then resistance will eventually break. Stronger support is found at 1.4160/40 and again at 1.4100.
The next area of resistance as far as I can see is to be found at 1.4260 and then 1.4290.
Yes these are multi year highs, but we are hitting the highs for a very good reason. The US Federal Reserve is encouraging a weak US Dollar by refusing to acknowledge the threat, or possible threat that inflation may pose to the US economy.
I can buy into this narrative as there is still insufficient data, we need to see more than just one month of above target inflation to determine if it is problematic or not. Let’s also not forget the Fed is all about jobs and full employment. So roll on Friday for Mays NFP.
The 156.00/20 area is continuing to keep a lid on the Pound. However, I have been looking for a correction, which we got yesterday but it was far from satisfactory.
A drop to 155.30/40 was something but hardly the 140 pips I was looking for. However, while we have resistance at 156.00 then I think the risk remains to the downside. I am looking for 155.30 support to be broken and see a corrective drop to 154.60/70 from where the GBP starts to look a good buy.
The Pound has been stuck in fairly tight ranges around a central pivot point of 1.2740 for the past 3 or 4 weeks. The fact that we are challenging 1.2800 this morning gives me some fresh optimism that we can make further gains.
However 1.2820/40 looks a little tough, but if broken it will open up a run higher to 1.2880 or 1.2920 in extension.
If we suffer another upside failure to break 1.2820/40, The GBP will return back down to our old support level of 1.2740/20 and if things go badly wrong for the GBP even 1.2680
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