GBP/USD: Sequence of false breaks adds to uncertainty.
GBP/USD has witnessed two failed breaks over recent sessions, which are best viewed in the hourly time frame. The initial fall under 1.5577 was quickly reversed which led to a push over 1.5726. This failed to gain momentum, seeing a return to the hourly range for the week.
As expected, 10 year Italian sovereign yields have found interim support close to 5.750% and are now trading back above 6.000%. If this deterioration continues then we can expect to see Sterling being adopted as a safe haven again. This may help to explain why we have not broken out of the week's range yet, whereas, at the time of writing, most other currencies are lower versus the USD from a weekly perspective.
We remain alert to the fact that we are nearing the base of the year long range which, given the short-term relief seen in the Euro-Zone, may offer opportunities to enter long positions.
Taking this approach will need to see levels closer to 1.5400 for a well placed stop. The range bound trade of the last few days is best avoided.