#EURGBP #ForexSignal: #Euro Falls Against #Pound After #ECB Meeting (12 April 2024)

• The euro has fallen against the British pound during the trading session on Thursday, breaking down below the 50-Day EMA.
• Ultimately, a lot of what we are seeing here is a simple continuation pattern of a potential accumulation phase.
• The market is currently dancing around the 0.8550 level, which is right in the middle of the overall range that we have been in for some time.

Underneath, we have the 0.85 level as a major support region, an area that has been tested multiple times. I think at this point in time, the market is likely to continue to look at that as a “hard floor” in the market, as it has been important more than once. The 0.86 level above is a major resistance barrier that a lot of people would pay close attention to, especially as the 200-Day EMA is sitting in that same area as well.

ECB Press Conference

The European Central Bank had an interest rate decision which of course was no change, but at this point in time, the market was paying more attention to the press conference afterward. Christine Lagarde suggested that the central bank would do something as soon as they think the inflation situation gets down to a reading of 2%. In fact, she even suggested that they were going to do things proactively down the road.

All things being equal, this is a market that I think is trying to form some type of accumulation phase and then bounce. The market is going to pay close attention to that 0.85 level, because it is so important from a longer-term technical analysis standpoint, and if we were to break down below there, it would obviously send the euro plunging. At this point, I don’t necessarily see that owning one currency over the other makes a huge difference, so I think we get a lot of back-and-forth more than anything else. However, we will eventually break out of this trading range, and once we do it’s likely that we will make a very significant move.

Potential signal

The EUR/GBP breaking above 0.86 has me buying this pair. I would have a 100 point stop, with a target of 0.8725 above. However, keep in mind that this market tends to move slowly, so patience will be needed.

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#Pound Shrugs Off Soft Construction #PMI : #GBPUSD (5 OCT 2023)

• UK Construction PMI declines

The British pound has ticked higher on Thursday. In the North American session, GBP/USD is trading at 1.2149, up 0.09%.

UK Construction PMI declines

The UK Construction PMI fell to 45.0 in September, down significantly from 50.8 in August and below the consensus estimate of 49.9. This was the first decline in three months and the steepest decline since May 2020. The survey found that high mortgage rates and weak demand for house purchases had a negative impact on the construction industry. As well, business expectations fell to their lowest level this year.

The Construction PMI release is further evidence that the Bank of England’s sharp tightening cycle has cooled down the economy. This week’s Services and Manufacturing PMIs both pointed to contraction in September, with readings below the 50 level. The British pound didn’t react to the Construction PMI release, but the pound continues to fall toward the symbolic 1.20 line and the currency will likely face further headwinds if upcoming releases remain soft.

As inflation continues to ease, many major central banks are close to or at the end of their rate-tightening cycle. The Federal Reserve, Bank of England and the ECB were all late to the rate-hike party and don’t want to prematurely declare that rate hikes are over. Inflation remains well above target for all three central banks and stating that rate hikes remain on the table means that policy makers can raise rates if needed without losing credibility.

The BoE paused in September and another hike at the November meeting is a strong possibility, barring a nasty inflation surprise ahead of the meeting. The BoE, which still has its hands full with inflation, says that rate cuts remain a long way off, but that could change if economic growth continues to weaken and inflation falls sharply.

GBP/USD Technical

• GBP/USD tested support earlier at 1.2120. The next support level is 1.2035

• There is resistance at 1.2196 and 1.2256

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#GBPJPY Forecast: #Pound Turns Around and Looks Higher Against #Yen: 7 April 2023

This is a market that will continue to be noisy, so traders need to be flexible and keep their position size reasonable.

• The GBP/JPY experienced some dips in Thursday's trading session, but buyers soon entered the market, turning the situation around.
• The Bank of Japan has continued to see the need to keep interest rates down, printing yen and buying bonds whenever they begin to rise.
• Meanwhile, the British pound has been one of the better performers worldwide, indicating a potentially bullish market.

Traders Should Stay Flexible

Despite the potential challenges, there are still opportunities for traders in this market. Traders should stay up to date with the latest developments and remain flexible in their approach. It's also crucial to maintain reasonable position sizes and watch the key indicators, such as the EMAs, to help navigate the market's volatility.

TLDR; the British pound has seen some dips in Thursday's trading session, but the Bank of Japan's continued efforts to keep interest rates down and the pound's overall performance suggest a potentially bullish market. However, traders should keep a close eye on the challenging ¥165.50 level and watch for potential moves to the ¥169 or ¥160 levels. Ultimately, traders should stay flexible, keep their position sizes reasonable, and monitor key indicators to navigate the market's volatility.

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#British #Pound Technical Forecast: #GBPUSD Dives Towards Support : 18 FEB 2023

British Pound technical forecast: GBP/USD weekly trade levels

• British Pound holds December highs- reverses back into downtrend support
• GBP/USD threat remains for further losses medium-term
• Sterling resistance ~1.2156, 1.2448, 1.2773– support 1.1783-1.1841, 1.1632/44 (key),

The British Pound plunged more than 4.2% off the January highs with GBP/USD now approaching initial trend support near the yearly low. While an outside-weekly reversal suggests some downside exhaustion here, Sterling remains vulnerable to a deeper correction while below this week’s high. These are the updated targets and invalidation levels that matter on the GBP/USD weekly technical chart.

British Pound Price Chart – GBP/USD Weekly

Technical Outlook: The British Pound has been trading within the January range since the start of the month with a reversal off Fibonacci resistance at 1.2448 taking GBP/USD back into downtrend support.

The focus is on a possible reaction off a key technical confluence at 1.1783-1.1841– a region defined by the 100% extension of the recent decline and the objective 2023 opening-range low. Ultimately, a break / weekly close below the 2020 low-week close / 38.2% retracement at 1.1632/44 is needed to mark resumption of the broader downtrend.

Initial resistance stands with the 52-week moving average (currently ~1.2156) with a breach above the yearly highs exposing pitchfork resistance around the February 2019 low at ~1.2773– an area of interest for possible exhaustion / price inflection IF reached.

British Pound Price Chart – GBP/USD Weekly (2009 Price Parallel)

A parallel of the 2009 rally (pink) suggests a period of consolidation here into these support zones before a larger correction lower. For context, Sterling remained rangebound for nearly 230 days before breaking decisively – the current GBP/USD range is roughly 90-days in.

Bottom line: The British Pound remains vulnerable to further losses but is quickly approaching initial support levels near the January low. From at trading standpoint, look to reduce portions of short-exposure / lower protective stops on a stretch towards 1.1640. Rallies should be capped by this week’s high IF price is heading lower. I’ll publish an updated British Pound short-term outlook once we get further clarity on the near-term GBP/USD technical trade levels.

Key Economic Data Releases

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#Pound,#FTSE Unimpressed by Fiscal Statement:17 NOVEMBER 2022

The pound and the UK stock markets have shown no major reaction to the fiscal statement after Jeremy Hunt unveiled an austerity budget with £55 billion in tax hikes and spending cuts. If anything, both have fallen, along with other risk assets today. Tax hikes are going to chock any chances of economic growth that there might be, with the UK economy set to plunge into a recession amid soaring prices. As household incomes continue to get squeezed, spending falls, company revenue and profit are going to get a hit. Against this backdrop, it is very difficult to be optimistic on the UK stock markets or the pound.

The FTSE’s struggles to add to its gains from the previous week suggests investors are more worried about a deteriorating domestic, Eurozone and global economies, than are hopeful about the US and other central banks easing rate hikes.

It looks like worries over China is the main focus right now, where Covid cases are on the rise again and investors fear more lockdowns are likely.

In the UK, recent data shows that quarterly GDP fell by a less-than-forecast 0.2%, while construction output and industrial production both topped expectations, even if they hardly grew. But the monthly GDP disappointed with a bigger fall of 0.6% on month. But the outlook looks grim and that’s where the market is focusing, not on the past.

UK’s soaring inflation means the BoE is expected to keep hiking interest rates, which should intensify the squeeze on the consumer. Lack of growth in the Eurozone and elsewhere are also not good news for UK’s multi-national corporations.

FTSE needs to stay below 200 MA for bears to pounce

The FTSE having turned lower on the week is now broken back below the broken 200-day average and was testing support around 7290-7310 at the time of writing. A daily close below these levels would make things look bearish again. For extra confirmation, the bears might be looking for move below recent lows at 7248. If we break that level, then things will look bearish again and the technical outlook will then match a darkening economic outlook.

GBP/USD breaks trend line after hitting a ceiling at 1.20

With the short-term trend line broken on the hourly chart, it looks like the path of least resistance is now back to the downside for the cable. So, watch out below!

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Sunset Market Commentary: #Pound Soars as US Dollar Retreats#AUD Soars as China’s Inflation Drops (9 SEPTEMBER 2022)

Pound Soars as US Dollar Retreats

GBP/USD has recorded sharp gains today. In the European session, GBP/USD is trading at 1.1608, up 0.92% on the day. Still, the pound remains vulnerable – on Wednesday, it fell to 1.1407, its lowest level since 1985. Looking ahead to next week, there is a data dump on Monday, with GDP and Manufacturing Production the key events.

It’s a very light calendar today, with no UK data and only one minor US event. Even so, the British pound has jumped on the bandwagon as the US dollar is broadly lower. The US dollar has taken a break after some impressive gains, as the pound has fallen some 500 points in just three weeks. With the US economy in good shape while the UK struggles, GBP/USD could resume its downtrend shortly.

In the UK, PMIs have been pointing to weak conditions across the economy. The August manufacturing and construction PMIs pointed to contraction, with readings below the neutral 50.0 line. The Services PMI managed to remain in expansion territory, but just barely, at 50.9. Inflation remains red hot, hitting 10.1% in July, which has caused a severe cost-of-living crisis.

Incoming Prime Minister Truss has pledged to cap energy bills, at a cost of some 132 billion pounds, which will provide households with some badly-needed relief. Truss inherits a struggling economy and her initial policy moves will be closely watched. Deutsche Bank has warned that an “unfunded and untargeted fiscal expansion” by the new government could raise inflation expectations and lead to a “sterling crisis”.

What’s next for the Federal Reserve? The next meeting is on September 21st, with the Fed looking to raise rates by either 50 or 75 basis points. Next week’s inflation report could be a major factor in the Fed’s decision. Fed Chair Powell and other members have stated that curbing inflation is “priority number one”, and if inflation falls, it will raise speculation that the Fed plans to ease up, which would weigh on the US dollar. In July, inflation unexpectedly fell, and market exuberance about a change in Fed policy sent the US dollar sharply lower, despite the Fed saying its stance had not changed.

GBP/USD Technical

• 1.1589 has switched to support. Below, there is support at 1.1417
• There is resistance at 1.1682 and 1.1839

AUD Soars as China’s Inflation Drops

The Australian dollar has posted sharp gains today. In the European session, AUD/USD is trading at 0.6837, up 1.27%.

China inflation falls unexpectedly

China’s economy has been stalling, as global demand has weakened and China rigorously enforces a zero-Covid policy. The slowdown in the Chinese economy has hurt global growth, but the silver lining is that August inflation also dropped, which has taken the edge off global inflation. China is a key driver of external inflation pressures, and the decline will be welcome news in the major economies, where inflation remains enemy number one and has led to a sharp tightening in policy.

China released the August inflation earlier today. On an annualized basis, August CPI was up 2.5%, lower than the 2.7% gain in July and below the consensus of 2.8%. The Producer Price Index for August slowed to 2.3%, down from 4.2% and below the estimate of 3.1%. The drop in CPI in the world’s number two economy has raised risk sentiment and sent risk-related currencies like the Aussie sharply higher today.

The RBA raised rates by 0.50% earlier this week, bringing the cash rate to 2.35%. RBA Governor Lowe said on Thursday that the RBA would need to raise interest rates at least twice more to contain the “scourge” of inflation. Lowe reiterated that the pace and extent of future rate hikes would be data-dependent, especially inflation and wage growth. After four straight hikes of 0.50%, the RBA may decide to ease up in October with a small hike of 0.25%. Next week’s employment report will be an important factor in the RBA’s rate decision.

AUD/USD Technical

• AUD/USD is testing support at 0.6737. Below, there is support at 0.6661
• There is resistance at 0.6737 and 0.6846

 

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#Pound Stable But Markets Uneasy (10 MAY 2022)

The British pound is in calm waters early in the week, as GBP/USD trades slightly above the 1.23 line. There are no major releases out of the UK or the US, which means that the pound should enjoy a quiet day.

Can the BoE get it right?

The British pound plunged over 2% last Thursday, a most difficult feat, considering that the Bank of England actually raised interest rates at its meeting that day. What went so wrong for the pound?

The BoE dutifully raised rates at the meeting, but investors lasered in on the central bank’s downbeat message which warned of a recession, while at the same time forecasting that inflation will top 10% this year. The UK is experiencing soaring inflation at growth remains weak, which are the ingredients for stagflation. The Bank slashed its growth forecast from 1.25% to -0.25%, and the spectre of negative growth may have shaken up investors and sent the pound on its laurels. The rate hike, which in any event was relatively small at 0.25%, failed to impress the markets.

BoE Governor Bailey was brutally honest when he said after the meeting that “It is a very weak projection, a very sharp slowdown”. I always appreciate when central bankers don’t hide behind gobbledygook, but the markets tend to reward good news, not honest news. There appears to be a heavy dose of scepticism as to whether the BoE can get it right, as it navigates between raising rates in order to curb inflation, while at the same time not choking economic growth. BoE Governor Bailey will need to show some achievements, such as lower inflation, in order to re-establish the central bank’s credibility, which has taken a blow in recent months.

The pound has stabilized for the time being but remains vulnerable. There is plenty of risk aversion in the air, with spiralling inflation, a slowdown in China and the Ukraine war. With the Federal Reserve in hawkish mode and the US economy performing well, the risk towards GBP/USD is tilted to the downside.

GBP/USD Technical

• There is support at 1.2199 and 1.2056
• GBP/USD faces resistance at 1.2418 and 1.2561

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#Pound Takes a Tumble after #BoE Hike: 04 MAY 2022

The British pound is fading badly on Thursday. GBP/USD has dropped a staggering 2.15% today and has fallen below the 1.24 line for the first time since July 2020. After the BoE decision, market focus has shifted to the elections in Northern Ireland later today. A Sinn Fein victory could weigh on the wobbly pound.

BoE hike fails to impress markets

The BoE raised interest rates for a fourth straight time since December, bringing the Official Bank Rate to 1.00%, its highest since 2009. Yet the market reception to the BoE move was decidedly chilly, as the pound has plunged almost 2% today.

Why the sour reaction from the markets? The 0.25% was a modest move and it’s questionable if it will have much impact on soaring inflation. In March, CPI rose to 7.0%, up from 6.2%, and the BoE has warned that inflation could surpass 10%. The modest rate hike passed by a vote of 6-3, surprising the markets which had expected an 8-1 vote. Two MPC members called for a 0.50% hike, which reveals a sharp split within the MPC. Governor Bailey admitted after the meeting that an uncertain economic outlook had led to a range of views in the MPC, and such a statement can hardly be expected to instill confidence amongst investors.

The BoE cannot be blamed for not being aggressive – it is well into its rate-hike cycle and the policy summary noted that “some degree of further tightening in monetary policy may still be appropriate in the coming months”. In addition, the BoE dropped the word “modest” to describe upcoming rate hikes. Yet the markets appeared to focus on the split vote and the warning from the BoE that the country could face a sharp economic downturn, and the thumbs-down response has sent the pound sharply lower.

As expected, the Federal Reserve raised rates at its meeting by a half-point, the largest increase in 20 years. The Fed signalled that it will deliver additional half-point hikes in June and July, with Fed Chair Powell stating that the FOMC was not “actively considering” a 0.75% increase.

The Fed is also implementing quantitative tightening with a reduction in the balance sheet. Starting in June, the Fed will sell USD 45 billion/mth in assets, which will rise to USD 95 billion/mth in September. In sharp contrast to the BoE’s hike, the financial markets reacted positively, as investors believe that the Fed’s rate hikes can curb inflation while ensuring a soft landing for the economy and avoiding a recession.

GBP/USD Technical

• GBP/USD faces resistance at 1.2612 and 1.2719
• There is support at 1.2272 and 1.2179

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#Pound Drifting ahead of Fed, BoE Meetings (4 May 2022)

The British pound is showing little movement for a second straight day, as GBP/USD trades just below the 1.25 level.

BoE expected to raise rates

Nobody can accuse the BoE of lacking an aggressive policy, although perhaps it should have done so earlier. The central bank has hiked rates at three straight meetings, and the streak is expected to continue at the May meeting on Thursday. The markets have priced in a 25-basis point hike, which would raise the Official Bank Rate to an even 1.00%.

The BoE’s hawkish stance hasn’t stemmed the pound’s plunge, with GBP/USD falling 4.31% in the month of April. I don’t expect the pound to get much relief after a 0.25% hike, and the risk to sterling remains tilted to the downside.

The primary driver behind the rate-hike cycle has been the urgency in dealing with soaring inflation, which hit 7% in March, a 30-year high. Like other central banks, the BoE faces the challenge of lowering inflation without choking off growth and sending the economy spinning into a recession. Governor Bailey recently acknowledged that the BoE is treading a “narrow path” between inflation and growth and has signalled that he will raise rates at a slower pace than the Fed, which is poised to raise rates by a half-point later today and possibly at upcoming meetings as well.

The Fed holds its policy meeting later today, and anything other than a half-point increase would be a huge surprise. A half-point increase has been priced in, but it is nevertheless a significant event. It will mark the Fed’s largest rate increase in 20 years and shows the Fed’s commitment to lower inflation. Investors will be monitoring the hawkishness of the rate statement, as well as the size of the trim to the Fed’s balance sheet (quantitative tightening), and an aggressive message from the Fed would likely boost the US dollar.

GBP/USD Technical

• GBP/USD faces resistance at 1.2612 and 1.2719
• There is support at 1.2379 and 1.2272

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#Currency Pair of the Week: #USDJPY (26 April 2022)

 Traders will turn their attention to US inflation data, the BOJ meeting, and US Yields to look for the next direction in USD/JPY.

It seems almost all but clear that the FOMC will hike 50bps when it meets on Wednesday, May 4th. Last week, Fed Chairman Powell noted that a 50bps increase will be “on the table” and that he sees a strong case for “frontend loading” in an effort to bring inflation down to their 2% target. In addition, the most hawkish member of the Fed, St Louis Fed President Bullard, even hinted that there is a possibility of a 75bps hike! However, he noted that it was not his base case scenario. This week is the last week in April, and that means end of month data. Q1 GDP will be released and is expected to be only 1.1% vs 6.9% in Q4 2020. However, the price deflator is expected to be 7.4% vs 7.1% in Q4. In addition, the US will release the Fed’s favorite measure of inflation, Core PCE. Expectations are for a YoY reading of 5.4% vs 5.4% in February. Also, this week, the US releases Q1 earnings for some big tech companies, including MSFT, GOOG, FB, AAPL, AMZN, INTC, and TWTR, among others. The results could sway the direction of the US Dollar.

The Bank of Japan (BOJ) meets this week. At its last meeting, the BOJ left rates unchanged at -0.1% and said it would target 0% for its 10-year government bonds. At the time, USD/JPY was near 119.00. Since then, the BOJ has been in the markets numerous times defending the cap on its 10-year JGBs at 0.25% and the exchange rate has climbed to as high as 129.41. Senior government officials have been trying to “talk down” the value of USD/JPY since price was below 125, however it was to no avail. Will the BOJ release the cap of 0.25% in order to strengthen the Yen and cause USD/JPY to move lower? Its unlikely, as the BOJ is still concerned with the lingering affects of the coronavirus and the impact of the Russia/Ukraine war. The Bank of Japan will update its forecasts for growth and inflation. Look for lower growth revisions, possibly in the 2.5% area for 2022, and higher inflation revisions, possibly as high as 2%. In addition, one thing traders can be sure to expect is more talk from Kuroda as he tries to talk down the USD/JPY exchange rate.

USD/JPY has been on a tear since breaking above 116.35 on March 11th. Notice that the correlation coefficient at the bottom of the chart between USD/JPY and US 10-year Yields is +0.94. A reading of +1.00 is a perfect positive correlation, indicating that the 2 assets move together 100% of the time. A reading of +0.94 is pretty close. Also notice that the RSI is in overbought territory and moving lower, an indication that price may be ready for a pullback.

On a 240-minute timeframe, USD/JPY is consolidating in a symmetrical triangle and is currently trying to break below the bottom trendline. If price does break below, first support is at the 38.2% Fibonacci retracement level from the low of March 31st to the high on April 19th near 126.30. Below there, price can fall to the 50% retracement level from the same timeframe near 125.34, then horizontal support at 125.10. However, if price moves back inside the triangle, first resistance is at the top, downward sloping trendline of the triangle near 128.80, then the highs of April 19th at 129.40. If USD/JPY breaks above there, watch for further resistance at the psychological round number level of 130.00.

There was a lot of hawkish talk from the Fed last week, including comments from Fed Chairman Powell. However, this week the Fed goes into a blackout period in which officials are restricted from speaking. Traders will now turn their attention to the US inflation data, the BOJ meeting, and US Yields to look for the next direction in USD/JPY.

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Can UK PMI and Retail Sales Data Lift Pound Before Next BoE Decision?(19 April 2022)

 The latest flash PMI and retail sales figures for the UK are due on Friday at 06:00 GMT and 08:30 GMT, respectively. These will be the last batch of major indicators before the Bank of England’s policy decision on May 5 so investors will be gauging them to get a sense of policymakers’ thinking on further rate hikes this year. Worries about slowing growth amid the cost of living crisis have been weighing on sterling since Russia’s invasion of Ukraine. Can the numbers lift the British currency out of the doldrums?

End of Covid rules is boosting services

Recent data out of the United Kingdom have been mixed. GDP grew a mere 0.1% month-on-month in February, but the survey data have been a lot more upbeat. The dominant services sector is still benefiting from the lifting of all virus curbs while the labour market continues to tighten. These effects were probably enough to sustain economic momentum in the early parts of April.

The services PMI is expected to moderate from 62.6 in March to 60.3 in April, remaining comfortably above the 50-neutral level that separates expansion from contraction.

Manufacturers are feeling more gloomy

However, the PMI indices globally are being inflated from record increases in their price components, overstating the true strength in business activity. Moreover, optimism is weakening, not just from the worsening cost pressures, but also from the uncertain outlook due to the heightened geopolitical tensions.

These have already begun to weigh on manufacturing firms, much more so than on services industries. UK manufacturers reported waning demand for consumer goods from both domestic and overseas clients in March and this trend likely accelerated in April. The manufacturing PMI is forecast to decline from 55.2 to 54.0 this month.

The big consumer squeeze is here

Higher food and fuel prices have started to eat into households’ disposable incomes, so consumers are naturally spending less on other goods as inflation hits 30-years highs. The full reopening of the British economy at the end of February has been a further drag on retailers as people have preferred to enjoy going to theatres and restaurants with no restrictions rather than to hit the high street.

Retail sales are expected to have fallen by 0.3% m/m in March. When excluding fuel sales, the drop is projected to have been slightly bigger at 0.4%. But what is more worrying is that the squeeze on consumers is only just starting. Many UK households will see their electricity and gas bills jump in April after the country’s regulator raised the cap energy firms can charge their customers. Adding to the pain, the national insurance rate went up for many taxpayers at the beginning of April, dealing a double blow to consumers.

BoE has been less hawkish lately

With the war in Ukraine also not looking like it will end anytime soon either, the growth outlook has dimmed significantly in the last few months, prompting the Bank of England to take a more precautionary stance against rapid rate increases. Despite that, expectations for how many times the BoE will have to raise rates by year-end remain elevated, with investors anticipating six additional 25-basis-point hikes on top of the 50 bps already delivered.

But those hawkish bets haven’t done the pound any favours, at least not against the US dollar. Concerns that the UK is headed for a stagflationary environment has been a major dampener on the pound this year. Cable brushed a 17-month low of $1.2970 earlier this month and is struggling to regain a foothold above the $1.30 handle.

Cable is testing $1.30 level again

Should the upcoming releases disappoint, intensifying fears about a slowdown or even a recession, sterling could slip as low as $1.28, which is just below the 161.8% Fibonacci extension of the December-January uptrend.

On the other hand, positive surprises in the data could help the pound regain some bullish posture and bring into scope the 50-day moving average at $1.3238.

Nevertheless, the odds of a big upside reversal are low at the moment for cable. A slightly more hawkish-than-expected tone by the BoE at the May meeting could potentially go some way in changing its fortunes around. But as things stand, the pound’s best hope is a de-escalation of the Russia-Ukraine conflict.

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