GBP/USD: plummets on broad dollar strength despite BoE hopes

• GBP/USD plummetted to test the 1.33 handle.
• GBP/USD: weighed by a broad-based rally in the greenback, frustrating trapped bulls at 1.3300/20.
• A close is needed above the falling 1.3422 20 DMA needed to clear put bearish commitments.

GBP/USD plummetted to test the 1.33 handle after peaking at an 11-day high in London on the back of the UK construction PMI beat, (52.5 vs 52.0 consensuses). GBP/USD is currently trading at 1.3303 at the time of writing, weighed by a broad-based rally in the greenback, frustrating trapped bulls at 1.3300/20 who were otherwise encouraged by the UK manufacturing PMI beat on Friday. 

The DXY has been on the front foot on Monday travelling in a northerly trajectory between  93.6640-94.1950 supported by elevated yields where the ten-year Treasury yield is up +0.57% at the time of writing, (2.90-2.92% range). Prior to the spike in the greenback, the bulls had enjoyed some modest strength in the pound in response to the release of stronger than expected construction PMI data ahead of Tuesday’s services and composite PMIs. This followed the UK's manufacturing beat and increases possibilities of some action from the BoE in August. "BoE rate expectations are showing signs of stabilization following their recent decline. OIS are pricing roughly 5bpts of tightening for August and roughly 15bpts for November, " analysts at Scotiabank argued. There will be BoE speakers this week, including Tenreyro at 1pm ET on today. 

Brexit

Brexit risk is also on the cards for this week where lawmakers will be returning to parliament where negotiations are scheduled to resume again as soon as Tuesday and should continue through to Friday. According to Bloomberg, the UK is said to be ready to publish Brexit plan for Irish border, which would be timely considering the next key timeline in Brexit talks is just around the corner where the EU summit at the end of this month will take place between 28-29th.

GBP/USD levels

GBP/USD can't sustain the hold above the 10-D SMA at 1.3334 that opens risk back to an extension of the bear trend established in April from 1.4376. Bulls needed to stay above the 10-D SMA and consolidate. For the tie being, the 100-hr support holds a clear break of the 1.33 handle where below the 1.3204 recent lows come 1.3040, as the Nov 3 low, come next. To the upside, a close is needed above the falling 1.3422 20 DMA needed to clear put bearish commitments with a target on the 50-W SMA at 1.3461 ahead of the convergence of the 200-D SMA and 1.3583/1.3600 tops. The 1.3708 level at the 50% Fib of 1.3040-1.4377 remains compelling on the wide.