GBP/USD: Climbing Back into the 1.5750-1.5900 Range

The pound to dollar exchange rate (GBPUSD) has bounced back into its favoured 2015 range. 

We are now watching for the pair to attempt a test of 2015 highs. At present the exchange rate is at 1.5532. 

The GBPUSD hit a high in the upper 1.59’s over the course of the summer and this level could be achieved once more argues Intesa Sanpaolo.

We believe this forms an optimistic scenario for sterling and would side with the view that we are likely to see ‘more of the same’ over coming days and weeks.

“After strong wage data earlier in the week, the GBP should benefit from the FOMC remaining on hold in the short term which can see GBPUSD grind up towards the 1.5750-1.5900 range highs,” say Lloyds Bank Research in a note to clients.

Lloyds say that while the USD is at risk of follow through selling in the near term, there is little reason to believe we should move out of recent ranges.

As the above shows, the GBPUSD exchange rate is comfortable trading around present levels. We would expect buying interest in sterling to ease as markets anticipate more range-bound movements.

GBPUSD Recovery Secure

GBP/USD is pushing higher and has broken the resistance implied by the upper bound of the uptrend channel.

"Hourly resistance at 1.5509 (27/08/2015 high) has been broken and hourly support is given at 1.5330 (15/09/2015 low)," notes Yann Quelann at Swissquote Bank.

Stronger support is given at 1.5165 (04/09/2015 low).

"In the longer term, the technical structure looks like a recovery bottom whose maximum upside potential is given by the strong resistance at 1.6189 (Fibo 61% entrancement)," says Quelann.

Note that we have just published a piece concerning new research from Morgan Stanley that warns a significant slump to 1.36 may occur.

Fed Drives US Dollar Selling

The key theme for the USD through the remainder of the week will be positioning in the wake of the decision by the US Federal Reserve to keep interest rates unchanged.

The Fed’s decision making committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market.

“Yesterday’s Fed decision is a positive for cable. However, how likely is a BoE rate hike at the end of the year if the Fed backtracks on its hiking intensions? It will probably take same time for sterling to find its way in a context of a soft FED and a soft ECB,” say Lloyds.