GBP/USD stabilizing on the 1.31 handle as traders now assess Brexit risks vs BoE meeting 2nd Aug

• There are no  comments on the outlook or next week’s BOE meeting from  BOE Deputy Governor Broadbent.
• Odds that are back near 70% for the August the 2nd’s meeting for a hike – according to BOEWATCH – that is something that could favour a bid in  cable as   UK  parliament is about to begin  a six-week summer recess on Tuesday.

GBP/USD is currently trading at 1.3104 at the  time of writing, unnerved by comments from BOE Deputy Governor Broadbent who has delivered a speech on the history and future of QE, given to the Society of Professional Economists, London.

“In this speech, Ben Broadbent argues that the effects of QE (quantitative easing) probably vary, depending on economic conditions and on what the central bank communicates about the overall stance of policy. He then discusses the MPC’s approach to unwinding QE,” – BoE.

There are no  comments on the outlook or next week’s BOE meeting, although, he has explained that if  inflation pressures weaken after QE reversal,  the  first  response will be to cut rates. The market will now have to wait for further headlines, from a domestic  point of view, regarding Brexit and wait  for next week’s BoE to see whether the MPC are preparing for a no deal Brexit to  whether  the most recent surprise disappointment in inflation data will sway their outlook and decision this time around.  

GBP/USD is carving out a southerly trajectory in a descending channel on the five-minute chart

Meanwhile, GBP/USD is carving out a southerly trajectory in a descending channel on the five-minute chart, trading within a  narrow range between 1.3095 and a recent high of 1.3109, capped by the bearish 50-5min SMA at 1.3110 within the broader hourly decent from the Asian 1.3158 highs when the Yen sparked-off a sell-off in the dollar.  

However, there could be some upside adjustment for sterling given that the UK  parliament is about to begin  a six-week summer recess on Tuesday. This should cut out some fo the Brexit noise and if the odds that are back near 70% for the August the 2nd’s meeting for a hike – according to BOEWATCH – that is something that could favour a bid in  cable.  

GBP/USD levels

The pound has been capped by the  50-D SMA is now located at 1.3279 and the weekly cloud top level. Sterling has been in a steep decline with RSI only now starting  to recover from just outside of oversold territory and the hourly sticks show stability here at 1.31 the figure.  

“GBP/USD’s low last week of 1.2957 was accompanied with a divergence of the daily RSI. Directly below here lies Fibonacci support at 1.2918 (50% retracement of the move up from 2016) and we are seeing some profit taking here. We would allow for recovery to the 1.3302/07 55 day ma and channel resistance,”

– analysts at Commerzbank explained.

Further  out,  1.3461/80  comes before the convergence of the 200-D SMA (1.3585) and 1.3597/1.3600.