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GBP/USD off lows, but yield spread stays bearish

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 11, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    The GBP/USD pair has recovered from the low of 1.4396 to trade around 1.4440 even though the 10-yr US-UK bond yield spread continues to favor USD.

    Focus on yield spread

    The benchmark UK 10-yr Gilt yield hit a record low of 1.295%; down more than 11 basis points on the day. Meanwhile, the US 10-yr treasury yield is down about 9 basis points. Consequently, the yield remains in favor of the US dollar.

    Nevertheless, a minor technical correction has managed to take the pair back to 1.4440 levels. The risk-off and the resulting drop in the Gilt yields is also indicating at the falling BOE rate hike bets.

    GBP/USD Technical Levels

    The immediate support is seen at 1.4396 (daily low), under which the spot could target 1.4378 (Feb 9 low), which if taken out shall open doors for a drop to 1.4351 (23.6% of 1.5230-1.479). On the higher side, a break above 1.4475 (hourly 100-MA + hourly 200-MA) could see the spot recovery to 1.45 handle.
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