- GBP/USD has been on the rise as coronavirus fears recede everywhere.
- Powell's testimony and Brexit headlines are set to move the pound.
- Wednesday's four-hour chart is showing an improving picture for the bulls.
Has the coronavirus outbreak peaked? For those suffering or exposed to the respiratory disease – from Wuhan to Brighton – the scare is far from over. However, the top influencers on GBP/USD are providing some calm.
Mark Carney, Governor of the Bank of England, has compared coronavirus' economic damage to previous ones and sounded calm. Apart from the potential bounce that would follow the economic damage, Carney also hailed the resilience of the UK's financial system. His words contributed to keeping the pound bid.
On the other side of the pond, Jerome Powell, Chairman of the Federal Reserve, said that the bank is closely monitoring the potential spillovers from China. However, he also sounded calm about the strength of the economy, adding that there is no reason to see the expansion ending soon. The calmer mood is somewhat weighing on the safe-haven dollar.
The third factor behind cable's advance comes from UK Gross Domestic Product figures for the fourth quarter. The British economy stagnated on a quarterly basis but yearly growth exceeded estimates with 1.1%. Overall, investors are shrugging pre-election figures and focusing on a "Boris boost" – a rise in business confidence after Prime Minister Boris Johnson was returned to office.
Sterling's Achilles Heel remains Brexit, but it seems that markets have become immune to heightened rhetoric ahead of official talks. The EU and the UK kick off negotiations in early March and have toughened their positions. Michel Barnier, Chief EU Negotiator, has said that Britain is "kidding itself" if it thinks that the EU will allow it to stray away from the bloc's rules while maintaining equivalence. Despite the posturing, both sides may compromise behind closed doors – and that is what investors are expecting now.
Powell continues testifying today and he may move markets, in addition to coronavirus headlines and Brexit speculation.
GBP/USD Technical Analysis
Momentum on pound/dollar's four-hour chart has turned positive and the pair is edging closer to the 50 Simple Moving Average. GBP/USD continues advancing after breaking above the steep downtrend resistance line that accompanied it earlier in the month.
While it is not out of the woods, the technical picture is improving.
Resistance awaits at 1.30, the round number which also capped cable last week. Next, 1.3060 was a resistance line beforehand and also converges with the 200 Simple Moving Average. 1.3110 held it down in late January and 1.3175 follows.
Below the battle line of 1.2975, support awaits at 1.2940, which was a swing low in early February. It is followed by 1.2895, a low point on Tuesday, and by the 2020 low of 1.2875.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD: Gains appear capped near 0.6580
AUD/USD made a sharp U-turn on Tuesday, reversing six consecutive sessions of gains and tumbling to multi-day lows near 0.6480 on the back of the robust bounce in the Greenback.
EUR/USD looks depressed ahead of FOMC
EUR/USD followed the sour mood prevailing in the broader risk complex and plummeted to multi-session lows in the vicinity of 1.0670 in response to the data-driven rebound in the US Dollar prior to the Fed’s interest rate decision.
Gold stable below $2,300 despite mounting fears
Gold stays under selling pressure and confronts the $2,300 region on Tuesday against the backdrop of the resumption of the bullish trend in the Greenback and the decent bounce in US yields prior to the interest rate decision by the Fed on Wednesday.
Bitcoin price tests $60K range as Coinbase advances toward instant, low-cost BTC transfers
BTC bulls need to hold here on the daily time frame, lest we see $52K range tested. Bitcoin (BTC) price slid lower on Tuesday during the opening hours of the New York session, dipping its toes into a crucial chart area.
Federal Reserve meeting preview: The stock market expects the worst
US stocks are a sea of red on Tuesday as a mixture of fundamental data and jitters ahead of the Fed meeting knock risk sentiment. The economic backdrop to this meeting is not ideal for stock market bulls.