US Dollar Highlights
-
Pound still suffering from the uncertainty over the Brexit vote
-
Possible rate hike back on the Federal Reserve's agenda
Sterling - US Dollar (GBPUSD) FX Technical Analysis
Sterling has been trading in a well-defined trading range of 1.3000-1.3300 for most of July. Post-Brexit, the Pound has not found many new friends and it was always going to struggle to maintain any significant rallies as markets begin to adjust to the new paradigm. As Theresa May and the Conservative party delay triggering article 50 until at least early 2017, businesses are reluctant to make long term decisions without understanding what our relationship with Eurozone will look like. This is causing uncertainty which is set to continue for the foreseeable future.
The short squeeze we saw in June was always likely to be short lived. In July, Mark Carney and the MPC cut rates by 0.25% and announced further stimulus in the form of additional Quantitative Easing by buying both gilts and corporate bonds. Growth and inflation was also downgraded and they stated that they would be prepared to do more if the economic situation deteriorated.
Considering that the UK is running a massive balance of payments deficit, it is unsurprising that the Bank of England seem pretty comfortable with a weaker Pound, seeing it as a mechanism for boosting growth through higher exports. It's a policy of benign neglect towards the Pound and it is hard to see why any currency will make significant gains in the short term.
Strong jobs growth in the United States has compounded the Pound's fall as it has now put interest rate hikes this year firmly back on the Federal Reserve's agenda. Investors are predicting that increased divergence in monetary policy can only weigh further on the Pound. For now any rally will be short lived.
Buyers
The Pound is now not as oversold as it has been over the last couple of months as markets stabilise over the summer. 1.3100 is initial resistance followed by stronger longer term resistance at 1.3300. I would not suggest targeting any higher than that at the moment.
Sellers
There may well be some more room for the Pound to sink further. Current levels are fairly attractive for short term sellers however if you have more time I would suggest leaving protection above 1.33 or 1.35 if you have deeper pockets looking for a test of low 1.20's.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.