Jump to content

British Pound Under the Pump Ahead of BoE and Fed Rate Decisions. Will GBP/USD Go Lower?


Recommended Posts

BRITISH POUND, GBP/USD, US DOLLAR, BOE, FED, CRUDE OIL, COAL, AUD, HANG SENG - TALKING POINTS

  • The British Pound slipped further today against USD as hikes are imminent
  • APAC equities were mixed and commodities are lower, dragging AUD down
  • All eyes are on central banks later this week. Will the BoE turn GBP around?

GBP/USD Daily Forecast - British Pound Pulls Back Ahead Of BoE Interest  Rate Decision

The British Pound leaked lower again today even though the Bank of England are expected to raise rates for the third time in this cycle by 25 basis points.

Commodity markets that have opened for the week are mostly in the red so far. At the time of going to print, Brent crude oil futures contracts are trading below US$ 111 bbl and the WTI contract is under US$ 107 bbl.

In the Asian session, all of the commodity-linked currencies are lower as a result, including AUD, CAD, NOK and NZD. The Aussie was the hit hardest due to an announcement from China that it will ramp up coal mining efforts.

It’s a touch ironic that the AUD is so much lower, as the Chinese authorities had banned the importing of Australian coal some time ago as a result of a diplomatic stoush.

It was only when Chinese authorities were in need of energy last year that they allowed the release of previously seized Australian coal.

The Japanese Yen also fell ahead of the Bank of Japan meeting later in the week, where it is expected to keep rates on hold.

This is in contrast to the Fed meeting on Thursday. It is anticipated to lift rates by 25 basis points.The US Dollar and the Euro were main gainers today.

Hong Kong and Chinese equities took a hit today while Australian and Japanese indices were in the green.

A collection of Chinese companies listed in the US continue to be marked down as the Securities Exchange Commission (SEC) cited them as not being compliant with US regulations on disclosure requirements.

The Hang Seng Tech index was notably weaker, down over 8% at one stage today. The lockdown of Shenzhen due to Covid-19 also contributed to negative sentiment.

Treasury bond yields are higher, with the 10-year note threatening the recent peaks, trading near 2.05%, up from Friday’s close of 1.997%.

Looking ahead for today, there’s not much data out of any note. The markets will be focused on central bank meetings later in the week with the Bank of England, the Fed and the Bank of Japan headlining.

The full economic calendar can be viewed here.

 

GBP/USD TECHNICAL ANALYSIS

Sterling made a four-month low today and could test support at the October 2020 low of 1.28538.

An extension of a descending trend line currently intersects near there and break lower might see an acceleration of bearish momentum.

The 10, 55 and 260-day simple moving averages (SMA) are all above the price and have a negative gradient which may suggest bearish momentum is evolving.

On the topside, resistance could be at the pivot points and previous highs of 1.32727, 1.34388, 1.34862 and 1.36435.

GBPUSD CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com. 14th March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      20,000
    • Total Posts
      87,978
    • Total Members
      69,149
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    RuckSack
    Joined 26/09/22 09:45
  • Posts

    • Charting the Markets: 26 September FTSE 100, DAX and S&P 500 hold their ground in early trading. GBP/USD at 37-year lows, EUR/GBP at 2-year highs and EUR/USD at fresh 20-year lows. And gold, Brent crude and lumber head lower as recessionary fears lift the dollar.     This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
    • Hi @Xandy Your requests have been submitted. Thank youAll the best - MongiIG
    • The post-Fed market sentiments continue to see major US indices drifting lower last Friday, with the Dow Jones Industrial Average closing at a new 2022 low. Source: Bloomberg   Forex Indices Dow Jones Industrial Average AUD/JPY Federal Reserve United States  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Monday 26 September 2022  Market Recap The post-Federal Reserve (Fed) market sentiments continue to see major US indices drifting lower last Friday (DJIA -1.62%; S&P 500 -1.72%; Nasdaq -1.80%), with the Dow Jones Industrial Average (DJIA) closing at a new 2022 low. While some dip-buying at the last hour was accompanied by a retest of their June 2022 low, the overall downward trend suggests that caution may remain and failure for a decisive bounce from this highly-watched level over the coming days could increase the chances of an eventual downward break. Risk assets continue to take its cue from further strength in the US dollar (+1.52%), while US short-term rates ticked higher as well, providing little catalysts to cheer. The inversion of the yield curve at a new low since 1981 reflects increased risks of recession, which may bode the question of whether economically-sensitive sectors could bear the brunt of the next leg of sell-off if economic conditions were to reveal further signs of weakness over the coming months. Year-to-date, the DJIA is down 19.1%, while the Nasdaq is down 31.5%. For the former, a break below its 30,000 psychological level will leave the level as a resistance to overcome. Equity bulls may attempt to defend a close in bear market territory over the coming days, but looming recession risks may point to such move as being a temporary reprieve.   Source: IG charts   The economic calendar last Friday brought about higher-than-expected flash Purchasing Managers' Index (PMI) readings out of US, with the services sector showing a slight contraction, which was better than expected (49.2 versus 45 forecast). That said, a knee-jerk upside reaction to the data was quickly overturned, which suggests that signs of economic resilience are currently overlooked in light of further policy tightening underway. Fed Chair Jerome Powell’s comments on Friday provided little fresh clues on rates and economic outlook, but ‘more pain’ to curb inflation remains the takeaway from the Fed meeting. The upcoming week will bring focus to a slew of comments from Fed officials once more, with one to watch for any resilience in market moves to these comments as a sign that the sell-off is attempting to stabilise. The key highlight may be the release of US personal consumption expenditures (PCE) price index to end the week, with the core aspect expected to show a further uptick to 4.7% from previous 4.6%, pointing to the persistence in pricing pressures. Asia Open Asian stocks look set for a negative open, with Nikkei -2.05%, ASX -1.67% and KOSPI -1.71% at the time of writing. Momentum may follow from further sell-off in Wall Street to end last week, with strength in the US dollar weighing on Asian indices on what tends to be an inverse relationship historically. The release of Japan’s composite flash PMI reading this morning saw overall economic activities hanging on to expansionary territory (50.9) with the heavy-lifting coming from its services sector (51.9 versus previous 49.5), likely reflecting the positive impact from reopening. That said, factory activities’ growth continues to come under pressure (51 versus previous 51.5), suggesting an ongoing moderation in global activities, which kept risk sentiments in check. This marks the slowest expansion since January 2021, with output and new orders contracting for the third consecutive month as firms face higher prices from a weaker yen and slowing global demand. The Nikkei 225 index continue to see some downward pressure after the data release, with a break below an upward trendline and a previous resistance-turned-support at the 26,900 level suggesting that sellers remain in control. The 26,900 level will serve as resistance to overcome, where a 38.2% Fibonacci retracement level stands. Level of support may be at the 26,000 level, where the index was supported on three previous occasions.   Source: IG charts   On the watchlist: Break below trendline support for AUD/JPY may leave 91.13 level on watch A subdued risk environment pressuring the risk-sensitive Australian dollar and Japan Ministry of Finance’s surprise intervention for the Japanese yen have both translated into a break of the AUD/JPY below an upward trendline support. Based on the IG client sentiment, traders are less net-short compared with last week, with recent changes in sentiment suggesting that the current AUD/JPY price trend may soon reverse lower despite the fact traders remain net-short. This follows a bearish moving average convergence divergence (MACD) divergence on the weekly chart, where lower highs on MACD accompanying higher highs on the pair points to dwindling upward momentum for now. This may leave the 91.13 level on watch next, where a 38.2% Fibonacci retracement level stands as support on three previous occasions.   Source: IG charts   Friday: DJIA -1.62%; S&P 500 -1.72%; Nasdaq -1.80%, DAX -1.97%, FTSE -1.97%
×
×
  • Create New...