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A break of 1.2950 would signal a deeper correction is in play potentially targeting a reversal back to 1.26/1.28 – a great buy opportunity ahead of FOMC meeting on 15/16 September, according to economists at Westpac.

Key quotes

“The eye-popping 20.4% collapse in UK GDP emphasises the vulnerabilities in the UK economy, especially if COVID case counts continue rising across Europe.” 

“GBP looks to be in a technical holding pattern as what looks like a short-term USD correction evolves through August. We still tend to see that move developing into an opportunity to sell USD into the Sep 15/16 FOMC outcome. However, it is quite possible that the correction could go further.” 

“For now, key support at 1.3020 and then 1.2950 remain intact; but a break of that lower level would signal a deeper correction is in play potentially targeting a reversal back to 1.26/1.28. We would use such a dip as an opportunity to buy ahead of the Fed’s possible move to average inflation targeting.”