A lone BoE hawk inspires some upside momentum in the Sterling

Global Markets

Sterling bulls gained some inspiration in Tuesday’s European session as a result of a hawkish BoE McCafferty who highlighted the risks of delaying a rate rise in the UK. Although his argument about the UK economy being left behind the curve was strong, the string of negative PMI releases in September combined with the recent deflationary CPI reading in October simply offers an even more compelling argument as to why a UK rate hike may be held off until the middle of 2016. The riskoff environment derived from the concerns over China’s growth complimented with increasing fears of an economic slowdown in the UK has put the GBP under pressure. Even though the GBPUSD currently remains technically bullish on the daily timeframe, a breakdown below the 1.5400 support may invite a steep decline back to the daily 200 SMA.

The Eurozone continues to be exposed to an extended period of punishment from the slowdown in Asia and falling commodity prices which have obstructed its 2% mediumterm inflation target. A bluntly spoken ECB Governor Nowotny has left the bears lingering on the Euro, as a result of his explicit statement that the ECB was clearly missing their inflation targets. With the latest deflationary September Eurozone CPI reading of 0.1%, there has been escalating expectations that the central bank may provide additional stimulus measures in the near future. This week’s soft China data which has left markets subdued may be the ingredient to rejuvenate ECB doves in the looming meeting this Thursday. Global developments which have bruised the Eurozone do offer a compelling reason as to why the ECB may induce additional QE and it just becomes a matter of when rather than if.

WTI has suffered three consecutive declines last week despite the ongoing weak sentiment towards the Dollar. This commodity continues to experience losses as ongoing soft data from China complimented with weakness from the US has fueled concerns over global growth. Any additional releases from Asia or the States which fail to meet expectations may result in mounting downwards pressure which in turn should cap any bullish momentum on WTI. This commodity remains technically bearish on the daily timeframe with any further fears about a reduction in demand for oil acting as a catalyst which should send prices back to the $44.00 support.

GBPAUD

The GBPAUD remains bearish on the daily timeframe as long as prices can keep below the 2.1355 resistance. Prices are trading below the daily 20 SMA and the MACD had crossed to the downside. A breakdown below the 2.1160 support may open a path to the next relevant support at 2.1000.

EURCHF

The EURCHF is technically bearish on the daily timeframe. Prices have broken down the ascending channel and some support can be found at 1.0800. A breakdown below this level will open a path to the next relevant support at 1.0720.

CADJPY

The CADJPY resides in a range with support based at 91.50 and resistance at 93.00. A breakdown below the 91.50 support may open a path to the next relevant support based at 89.00.

GBPJPY

The GBPJPY has breached the previous lower high based at 184.50. This pair is in the process of turning technically bullish on the daily timeframe. Prices are above the daily 20 SMA but the MACD has yet to cross to the upside. If the 184.50s act as a new support, next relevant resistance will be at 187.50.