GBP/USD - Falling channel established ahead of Carney & PM May speech

GBP/USD is moving in a well established falling channel (seen on the hourly chart) as the US dollar remains bid on account of a rise in the treasury yields.

The currency pair clocked a high of 1.3409 in Asia after the Bank of England's [BOE] Haldane said rate hike would be good news. However, gains were short lived and the currency pair drifted lower to 1.3388 levels.

Focus on PM May & Carney speech

As per BBC report, "Theresa May is set to restate her determination to be tough on public spending despite political pressure to ease up on austerity." "Continuing to deal with our debts," is the way to strengthen the economy, the prime minister will insist today.

The pro-austerity stance of the government means the BoE will have to bear the burden of  supporting the economy via lower rates.

Elsewhere, BoE governor Mark Carney will take center stage as the central bank celebrates 20-year anniversary of its independence. Prior to 1997, interest rate decisions were taken by the Chancellor, rather than by independent economists. The Bank has since gained further powers. European Central Bank president Mario Draghi, Federal Reserve vice chairman Stanley Fischer, as well as International Monetary Fund managing director Christine Lagarde are also due to attend

Kathy Lien from BK Asset Management says, "If BoE Governor Carney, who speaks on Thursday repeats that a rate hike may be needed, we could see GBP/USD shoot back up to 1.35.  However, if he leaves the market less than convinced that rates will be increased before the end of the year, GBP/USD could test support at 1.3285."

GBP/USD Technical Levels

The falling channel resistance is seen at 1.3416, and the support is seen at 1.3330. FXStreet Chief Analyst Valeria Bednarik says, "despite strong local sales data, the pair remained under selling pressure, having spent most of the US session stuck around 1.3400. The level stands for the 50% retracement of the latest bullish run between 1.3146 and 1.3653. From a technical point of view, the pair is biased lower, as the 20 SMA in the 4 hours chart gained downward strength above the current level, now near the 38.2% retracement of the mentioned rally around 1.3460 and reinforcing the static resistance, while technical indicators hover within negative territory, lacking directional clues. The main support comes now at 1.3340, the next Fibonacci support and the level to break to confirm additional declines ahead."