GBP/USD spikes to fresh multi-month highs near 1.32 on month-end flows

The GBP/USD pair gained more than 60 pips in a matter of minutes into the London fixing and refreshed its highest level since mid-September at 1.3198. After the initial upsurge, the pair gave back some of its earnings and is now trading at 1.3173, up 0.29%, or 50 pips, on the day.

There were no clear catalysts behind that recent move and month-end flows seem to have created a heavy selling pressure on the greenback. The US Dollar Index quickly slumped below the 93 mark to see its lowest level in 14 months and is now at 92.98, losing 0.24%. The fact that the move wasn't triggered by a fundamental development makes it harder for it to become sustainable.

Earlier in the session, the data from the U.S. came in mixed and were largely ignored by the participants. The Chicago PMI eased to 58.9 in July from 65.7 in June and missed the market consensus of 60. On the other hand, the Pending Home Sales released by National Association of Realtors showed that it increased by 1.5% in June and beat the market consensus of 1%. 

Later in the week, the BoE is going to announce its monetary policy decisions. James Smith, Economist at ING, argues that a rate hike this year is unlikely, and adds that the recent hawkish shift is mostly designed only to get markets considering the risk of tighter policy.

• BoE Preview: Fading momentum to keep BoE on hold this year - ING

Technical outlook

The RSI on the daily graph is staying near the 70 handle, suggesting that the pair could make a technical correction before continuing its upsurge. With a daily close above 1.3200 (psychological level/daily high), the pair could aim for 1.3250 (Sept. 16 high) and 1.3345 (Sept. 12 high). On the downside, supports could be seen at 1.3100/1.3095 (psychological level/daily low), 1.3000 (Jul. 26 low) and 1.2950 (Jul. 21 low). 

• GBP/USD bullish on a close above 1.3150 – UOB