GBP / USD extends bounce to new two-day highs above 1.3550

• The pound continues to rise from monthly lows against a weaker dollar.
• DXY retreats from monthly highs towards 94.00.
• Producer prices in the United States are published on Tuesday and inflation prices on Wednesday.

The GBP/USD it is recovering on Monday after falling to 1.3423 last week, the lowest level in a month and slightly above the yoy low. During the American session, the pound rose to 1.3579, hitting a new two-day high. The pair is hovering around 1.3555 / 60, more than 100 pips above the daily low at 1.3450.

The recovery in GBP / USD is being driven by a weaker US dollar across the board. The greenback is retreating after last week’s rally, continuing the move that began on Friday after the NFP.

Higher US yields are not helping the greenback. At 10 years, they stand at 1.48%, (rising more than 2%). The DXY is falling for the second day in a row, testing 94.00. Producer price and inflation data for the United States will be released on Tuesday and Wednesday.

Market participants continue to digest last week’s Bank of England meeting. The central bank’s dovish tone weighed on the pound. During Monday’s European session, the pound strengthened for the first time since the meeting and rose across the board.

Still, the BoE decision and Brexit concerns could still weigh on the GBP. “The outlook for the pound will be guided by expectations about the pace of the BoE’s policy tightening relative to policy decisions taken by other major central banks such as the Fed and the ECB. On the other hand, UK policy on Brexit issues can also affect the performance of the GBP, “explained Rabobank analysts.

The pair is again supported above 1.3400

The GBP / USD decline found support above 1.3400, just as it did in September. If it breaks below, the pound would likely accelerate lower. On the positive side, a firm recovery above 1.3600 should strengthen the bullish outlook.

Technical levels