GBP/USD: Mon Pol divergence ends corrective rally

Corrective rally in the monetary policy divergence between Fed and BOE is once again weighing over Cable in Asia as markets prepare for hawkish Yellen on Wednesday

Treasury yields rise

Long duration and short duration treasury yields in the US rose, suggesting markets expect Yellen to drop a rate hike hint on Wednesday. Consequently, the focus is back on the monetary policy divergence between Fed and BOE.

Thus, Cable was offered at a high of 1.3083 (5-DMA) in Asia. The bird was last seen trading around 1.3043. The decline also marked failure to sustain above the key technical level of 1.3056 (July 26 low).

GBP/USD Technical Levels

A breakdown of immediate support at 1.3012 (10-DMA) would open doors for a drop to 1.2956 (Aug 9 low). A violation there could yield 1.2865 (Aug 15 low). On the other hand, a break above 1.3083 (5-DMA) would expose 1.3185 (Friday’s high), above which the spot could target 1.3357 (50-DMA).