GBP/USD turns flat on the day near 1.3170 as DXY remains below 97
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GBP/USD turns flat on the day near 1.3170 as DXY remains below 97

  • BoE’s Saunders says policy reaction to Brexit could be in either direction.
  • Private sector employment in the U.S. increased by less than expected.
  • US Dollar Index stays flat on the day below 97.

After closing the last four trading days in the negative territory, the GBP/USD pair is having a tough time determining its next near-term direction and is fluctuating in a relatively tight range. As of writing, the pair was virtually unchanged on the day at 1.3168.

Earlier today, several news outlets reported that yesterday’s meeting between the EU’s Chief Brexit Negotiator Michel Barnier and British Brexit Secretary Barclay and Attorney General Cox didn’t yield any agreements to weigh on the British pound. Additionally, a spokesman for the European Commission told reporters that Michel Barnier informed the Commission that they haven’t been able to find a solution to the Irish backstop issue in Tuesday’s talks.

On the other hand, the greenback struggled to preserve its strength and the US Dollar Index stayed below the 97 mark to keep the pair’s losses limited. A more-than-1% drop in the 10-year US T-bond yield and disappointing data from the U.S. capped the DXY’s rally on Thursday.

  • US: ADP – Private sector employment increased by 183K in February vs 189K expected.
  • US: Trade deficit rose to $59.8 billion in December vs $57.9 billion expected.

Later in the day, Bank of England rate-setter Saunders told a crowd at Imperial College in London that the policy reaction to Brexit wouldn’t be automatic and could be in either direction.

  • BoE’s Saunders: Assuming smooth Brexit, limited and gradual tightening probably needed over time.
  • BoE’s Saunders: Rates could move either way after no deal.

Technical outlook by FXStreet Analyst Yohay Elam

GBP/USD dropped below the 50 Simple Moving Average on the four-hour chart and Momentum is decidedly to the downside.  Both are bearish signs. The Relative Strength Index is still above 30, thus not exposing oversold conditions.

Support is at the round number of 1.3100 which supported the pair on Tuesday. The next level to watch is 1.3050 which provided some support in late February and meets the rising 200 SMA. 1.3010 cushioned cable in mid-February and is followed by the swing low fo 1.2970 seen later last month.

1.3150 supported the pair on Tuesday and is fought over at the time of writing. 1.3200 was the high point on Tuesday and also a round number. 1.3270 was the peak on Monday, before GBP/USD closed the gap. 1.3350 is the high point recorded late in February.  

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