This article is originally referred from IronFX Intraday Comment.
• The dollar traded lower or unchanged against its G10 counterparts during the European morning Tuesday. It was lower against NZD, AUD, JPY, EUR and CHF in that order.
• The British pound was again in focus today, following overnight comments by BoE policymaker Martin Weale. The official, who just a week ago urged for the Bank to wait before reducing rates, hinted that the poor PMI reports for July made him change his mind and that he now favors immediate policy easing. Cable came under selling pressure on these news and continued its fall during the European morning. However, it found fresh buy orders near the 1.3070 zone and recovered all of its overnight losses. Considering that Weale, a known monetary hawk, reversed his opinion so rapidly after seeing the first signs of growth slowing down, we believe that most of the Committee is also likely to favor policy easing in August. Even if other hawks, such as MPC members Forbes and McCafferty decide to dissent due to the lack of more ‘hard data’, we believe that they are likely to be vastly outnumbered. As a result, we maintain our call for a rate cut at the August meeting, perhaps even accompanied by unconventional measures such as a resumption of the Bank’s asset purchase program. We continue to expect a combination of weak post-referendum data and heightened expectations for monetary easing to keep GBP under pressure in the near term.
• GBP/USD traded in a consolidative mode during the European morning Tuesday, staying slightly above the support zone of 1.3070 (S1). The rate has been trading in a sideways range between 1.3070 (S1) and 1.3270 (R2) since the 15th of July. As a result, I prefer to take the sidelines for now with regards to the short-term picture. Taking a look at our short-term oscillators, I see that both of them move in a sideways manner near their equilibrium lines, supporting the trendless mode of the pair. In my view, a clear dip below the key obstacle of 1.3070 (S1) is needed to turn the short-term outlook back negative. Something like that is possible to open the way for the 1.2875 (S2) territory. Zooming out to the daily chart, I still see a long-term downtrend. Therefore, I would treat the 6th -15th of July recovery as a corrective phase and I would expect the bears to regain momentum at some point soon.
• Support: 1. 3070 (S1), 1.2875 (S2), 1.2800 (S3)
• Resistance: 1.3170 (R1), 1.3270 (R2), 1.3350 (R3)
Original Source: IronFX Intraday Comment