GBP/USD: Hourly range breaks, new macro target

Cycles & Levels: The weekly is stuck in a range, while the daily is quickly advancing towards a major area of interest between 1.3085 and 1.31. Not only is the area a former horizontal daily support, but it’s also the midpoint of the most recent broken range. On the hourly, an interesting development is starting to occur, as the price is finding acceptance above the resistance at 1.3030. If further momentum can be built over the next week, based on the principles of market symmetry and normal distribution (bell curve), the next buy-side campaign could take us all the way to the next macro target of 1.33. This move would be in line with the weekly dynamics (retesting the topside of the range) but against the daily downcycle.

Correlations & Volumes: Generally speaking, when the tapering of volume occurs on the way up, as in the case of the Pound on Monday, the move is poised to exhaust. However, for such a scenario to be considered, sellers need to at least build value below the previous day’s POC, which comes at 1.3020. I’d personally need to see 1.30 re-taken to gain further conviction that the market is shifting its focus back down. Remember, at this stage, the pair is very much a sentiment play on the hopes that a Brexit deal can be hashed out. What this means is that even if the 5-year UK vs USyield spread trades at the lows of the year, short-term sentiment tends to overrule the power of capital flows in favor of the USD. As the overall risk scenario stands, it supports the upside.