GBP/USD – vulnerable to stimulus expectations, still above 1.31

Friday’s sell-off in Cable highlighted the vulnerability of GBP to stimulus expectations; however, it failed to push the spot below Wednesday’s low of 1.3065.

Trades around weekly 5-MA

At 1.3130, the spot is trading just above weekly 5-MA level of 1.3119 levels. Currency was heavily offered on Friday after preliminary UK PMI report showed sharp deterioration in economy in the post Brexit vote period.

The data pushed up bets that Bank of England (BOE) would cut rates in August. Still, the sell-off failed to take the pair below last week’s low of 1.3065. Consequently, a technical recovery is being attempted in Asian session today, although the spot is having a tough time moving above weekly 5-MA levels.

GBP/USD Technical Levels

A break above 1.3156 (5-DMA) would open doors for 1.3206 (June 30 low). A violation there could yield a test of 1.3315 (23.6% of 1.5019-1.2789). On the other hand, a breakdown of support at 1.3064 (last Wednesday’s low) could see the spot drift lower to 1.30. A violation there could yield 1.29 levels.