GBP/USD Forecast: Recovery could end in a screeching halt on a trio of central bank uncertainties
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UNLOCK OFFER- GBP/USD has bounced off the lows as Evergrande fears ease.
- Uncertainty ahead of the Fed, PBOC and BOE could keep the pressure on cable.
- Tuesday's four-hour chart is pointing to further falls.
Cable has failed to recapture the broken support line – and that already implies it is set to continue falling. The 1.3730 level provided support twice in recent months and the decisive 90-pip plunge indicates recapturing it will be a struggle.
The safe-haven dollar is taking a breather from gains as investors seem less fearful about the fate of Evergrande, China's second-largest real-estate company. Soothing words from its Chairman and calm from commercial banks – which comment that it is not a "Lehman moment" are behind the improvement in sentiment. This may be short-lived.
The construction behemoth owes some $300 billion and is struggling to pay. Moreover, authorities are reluctant to bail it out, showing that they are less interested in stimulating the economy – something that has implications for global growth. China is on holiday on Tuesday but returns on Wednesday with a crucial decision by the People's Bank of China )PBOC). Uncertainty toward Beijing's decision could further weigh on markets.
See PBoC September Preview: Will policymakers step in to ease Evergrande fears?
Later on Wednesday, the US Federal Reserve is broadly expected to refrain from tapering its bond-buying scheme. Nevertheless, tensions are mounting toward the event, which includes new forecasts and a hint toward the bank's withdrawal of support.
Fed Chair Jerome Powell is a dove, and he could send the dollar down – but on Tuesday, uncertainty could cause jitters in markets. The greenback has room to gain ground.
See Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot
The third significant central bank decision comes on Thursday, from the Bank of England. Rising UK inflation and another drop in the jobless rate could push come BOE members to back tapering bond-buying or even raising rates. On the other hand, shortages of staff and goods could hold the bank back. Sterling bulls will likely hesitate before the event.
Overall, a trio of central bank uncertainties could keep the lid on any gain.
GBP/USD Technical Analysis
Pound/dollar continues struggling with downside momentum and trades below the 50, 100 and 200 Simple Moving Averages, all bearish developments. The failure to move closer to the broken 1.3730 level mentioned earlier is another warning sign.
Support awaits at 1.3660, which was a swing low in late August. It is followed by 1.3640, Monday's trough, and then by 1.36.
Resistance beyond 1.3730 awaits at 1.3765 and 1.3815.
- GBP/USD has bounced off the lows as Evergrande fears ease.
- Uncertainty ahead of the Fed, PBOC and BOE could keep the pressure on cable.
- Tuesday's four-hour chart is pointing to further falls.
Cable has failed to recapture the broken support line – and that already implies it is set to continue falling. The 1.3730 level provided support twice in recent months and the decisive 90-pip plunge indicates recapturing it will be a struggle.
The safe-haven dollar is taking a breather from gains as investors seem less fearful about the fate of Evergrande, China's second-largest real-estate company. Soothing words from its Chairman and calm from commercial banks – which comment that it is not a "Lehman moment" are behind the improvement in sentiment. This may be short-lived.
The construction behemoth owes some $300 billion and is struggling to pay. Moreover, authorities are reluctant to bail it out, showing that they are less interested in stimulating the economy – something that has implications for global growth. China is on holiday on Tuesday but returns on Wednesday with a crucial decision by the People's Bank of China )PBOC). Uncertainty toward Beijing's decision could further weigh on markets.
See PBoC September Preview: Will policymakers step in to ease Evergrande fears?
Later on Wednesday, the US Federal Reserve is broadly expected to refrain from tapering its bond-buying scheme. Nevertheless, tensions are mounting toward the event, which includes new forecasts and a hint toward the bank's withdrawal of support.
Fed Chair Jerome Powell is a dove, and he could send the dollar down – but on Tuesday, uncertainty could cause jitters in markets. The greenback has room to gain ground.
See Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot
The third significant central bank decision comes on Thursday, from the Bank of England. Rising UK inflation and another drop in the jobless rate could push come BOE members to back tapering bond-buying or even raising rates. On the other hand, shortages of staff and goods could hold the bank back. Sterling bulls will likely hesitate before the event.
Overall, a trio of central bank uncertainties could keep the lid on any gain.
GBP/USD Technical Analysis
Pound/dollar continues struggling with downside momentum and trades below the 50, 100 and 200 Simple Moving Averages, all bearish developments. The failure to move closer to the broken 1.3730 level mentioned earlier is another warning sign.
Support awaits at 1.3660, which was a swing low in late August. It is followed by 1.3640, Monday's trough, and then by 1.36.
Resistance beyond 1.3730 awaits at 1.3765 and 1.3815.
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