GBP/USD – Eyes US durable goods report

Cable is attempting to cut through offers around 1.4533 (50% of 1.5230-1.3535) ahead of the data release in the US, which could show corporate spending as represented by durable goods orders rebounded in March after a 3% drop in February. More than the headline figure, traders would be interested to see how Non defense capital goods excluding aircraft category did in March.

Note the 10-yr treasury yield is trading around 1.9%. Oil is on a front foot as well and showing no signs of weakness. Hence, a strong durable goods report could send 10-yr yield closer to 2% and strengthen USD across the board. In such a case, Cable could re-test inverse head and shoulder neckline support at 1.4385 levels, although markets have trimmed Brexit bets and thus fresh demand for Sterling could be anticipated near 1.4385-1.44 levels.

On the other hand, a dismal durable goods orders release could see Cable make a run at 1.4578 -1.46 levels.

• Technicals – watch out for a failure at 1.4533
  
  Cable’s bullish inverse head and shoulder breakout coupled with bullish daily and hourly RSI indicates ample scope for a further upside in the pair from the current level of 1.4530.
  

• However, area around 1.4533-1.4578 has acted as a strong resistance since early Feb, hence bulls should observe caution as failure to take out or sustain above 1.4533 could trigger a minor drop to 1.4459-1.4436, under which inverse H&S neckline at 1.4386 stands exposed.
  

• On the higher side, intraday break above 1.4578 could yield 1.4617, although rise should be viewed with caution.