The GBP/USD pair fluctuated wildly at the closing minutes of the European session amid month-end flows but quickly went into a consolidation phase. At the moment, the pair is trading quietly at 1.2985, losing 0.18% on the day.
Despite today’s retracement, the pair is recording its highest weekly gains with nearly 250 pips since the snap election announcement in mid-April in the U.K. Hawkish comments from the BoE Governor Carney accompanied by a relentless fall seen on the USD have been main reasons behind the pair’s upsurge this week.
On the other hand, the US Dollar Index is preserving its recovery gains on Friday as mixed macro data failed to provide a fresh catalyst for the greenback. At the moment, the DXY is at 95.50, up 0.18% on the day. However, the index is still marching towards its lowest weekly close in nearly nine months.
With this week’s announcements from BoE’s Carney, BoC Governor Poloz and ECB President Draghi, monetary policy divergence between these banks and the FED seems to have changed course. Since the end of the last year, the FED had been seen as being one step ahead of other major central banks in regard to monetary tightening but now the Fed is back in a ‘wait and see’ mode while the BoC, the BoE, and the ECB are giving signals that they can start moving away from the accommodative policy soon.
Although it seems unlikely, with a weekly close above 1.30 (psychological level), the pair could aim for 1.3050 (May 18 high) and 1.3120 (Sept. 22, 2016 high). On the downside, supports locate at 1.2940 (Jun. 29 low), 1.2855 (50-DMA) and 1.2765 (20-DMA). With today’s retreat, the RSI on the daily graph corrected its overbought readings, suggesting that the pair could have another leg up before falling any further.