GBP/USD rises above 1.40 for the first since post-Brexit vote

Cable peeps above 1.40 in Asia.
Defies weak UK data and rising treasury yields.
Will it hold above 1.40?

GBP/USD clocked a new post-Brexit vote high of 1.4003 and was last seen trading at 1.3990 levels.

As discussed yesterday, the rally looks unjustified if we take into account the widening 10-year UK-US yield spread. Also, the RSI has diverged on 1-hour and 4-hour time frame (has not made new highs along with price), signaling the potential for a pullback. Further, a false upside break would be confirmed if the spot closes below 1.3945 (Jan 19. high).

That said, the macro data out of UK has not been encouraging either. As Kathy Lien from BK Asset Management says, consumer price growth slowed year over year and retail sales nosedived in the month of December. Excluding auto purchases, retail sales experienced its largest decline in 7 months.

Hence, GBP bulls may find it hard to keep the pair above 1.40 unless the labor data due tomorrow shows a sharp rise in the wage growth figures.

GBP/USD Technical Levels

Valeria Bednarik, Chief Analyst at FXStreet writes, "technically, the bullish strength remains intact despite the absence of upward momentum, as in the 4 hours chart, the pair bounced sharply from a bullish 20 SMA after spending the day holding around it, while indicators turned marginally lower, still holding within positive territory. Speculative interest seems determine to test the 1.4000 level and even attempt to extend gains beyond it, despite extreme overbought conditions present in bigger time frames.

Support levels: 1.3800 1.3770 1.3735

Resistance levels: 1.3865 1.3900 1.3945

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