GBP/USD short-term technical picture looks neutral  - Scotiabank

Eric Theoret, Strategist at Scotiabank noted that UK-US interest rate differentials remain a drag for GBP while the short-term technical picture remains neutral.

Key Quotes

“Interest rate differentials remain a drag for GBP as the 2Y U.K.-U.S. spread pushes beyond -80bpts. Softer employment data (+49K 3m/3m vs. +91K expected) have added to the spread-driven move and GBP remains vulnerable to Brexit-related headlines. We highlight Tuesday’s late (NA session) afternoon spike driven by rumors of a potential delay to the process.”

“In terms of sentiment, measures of implied volatility are steady, off their early October highs. Risk reversals are also stable and appear to be marginally eroding the modest premium for protection against GBP weakness.”

“GBPUSD short-term technicals: neutral—GBP continues to trade within the range from early November, roughly bound between 1.2350 and 1.2680. The 50 day MA has delivered resistance and the 9 day MA is providing for near-term congestion. We would anticipate support at the 21 day MA (1.2346).”