GBP/USD better bid on a key week ahead, watching FOMC

Currently, GBP/USD is trading at 1.2660, up 0.67% on the day, having posted a daily high at 1.2671 and low at 1.2567.

GBP/USD has been holding the support line at 1.2550 after a sell-off from 1.2775 area and the peak of its Brexit/ flash-crash recovery. "While GBP has trended higher from its early October low, cable is still 18% weaker than its pre-referendum levels and EUR/GBP is almost 10% higher," explained analysts at Rabobank. GBP/USD saw $1.50 just before the referendum results were announced in late June and the low for the year was $1.1840 on the back of the flash crash on October 7.

Commerzbank's EUR/GBP outlook

"We maintain a negative bias and look for a retest of the recent low at 0.8304 and the 200 day ma at 0.8296."

However, with the ECB's dovish rhetoric last week compared to expectations for reflation in the US economy and political uncertainty in the EU, the pound can drift higher vrs the euro, certainly on a soft Brexit story, and it is questionable how much of a rate hike is already priced into the dollar that could be due a correction from its recent highs. The MPC will meet this week, along with the Fed and much will depend on their forward guidance, if any will be given at all if the BoE have no bias either way. In respect to the FOMC, the Fed funds futures continued to imply a 100% chance of a rate hike on 14 December, and two more rate hikes priced in for 2017.

GBP/USD:  Scope for additional near-term gains - BBH

GBP/USD levels

Spot is presently trading at 1.2661, and next resistance can be seen at 1.2671 (Daily High), 1.2685 (Daily Classic R3), 1.2720 (Weekly Classic R1), 1.2726 (Weekly High) and 1.2728 (Monthly High). Next support to the downside can be found at 1.2654 (Daily Classic R2), 1.2634 (Weekly Classic PP), 1.2627 (Hourly 100 SMA), 1.2622 (Yesterday's High) and 1.2619 (Hourly 200 SMA).

Commerzbank's GBP/USD outlook

"We look for the market to come under increasing downside pressure this week. We look for the market drop to the 1.2434 two month uptrend. This remains the break down point to the 1.2090/85 October 11 and 25 lows. Intraday rallies are likely to now struggle circa 1.2665. Initial support lies at 1.2302/1.2285."