GBP/USD stabilizing above 1.2100 ahead of the Johnson-Macron meeting
GBP/USD is trading above 1.2100, steady. After German Chancellor Merkel offered UK PM Johnson 30 days to solve the Irish Backstop problem, Johnson meets French President Macron.
1. Technical Overview
From a technical perspective, the pair has been recovering steadily along a short-term ascending trend-channel formation on hourly charts. Against the backdrop of the recent fall, the mentioned channel constitutes towards the formation of a bearish continuation - flag chart pattern - clearly indicating that the near-term selling pressure might still be far from being over. A convincing break through the channel support - currently near the 1.2100 handle - will reaffirm the bearish set-up and turn the pair vulnerable to accelerate the slide back towards challenging the key 1.20 psychological mark.
On the flip side, any attempted recovery might now confront some fresh supply near mid-1.2100s, above which the recovery could get extended - albeit seems more likely to remain capped near the top end of the trend-channel - currently around the 1.2200 round figure mark. Only a sustained breakthrough the mentioned barrier would negate the near-term bearish outlook and prompt a short-covering bounce immediately towards the 1.2245-50 supply zone.
GBP/USD PRICE SENTIMENT
GBP/USD BULLISH PERCENTAGE INDEX
GBP/USD Pivot points
GBP/USD trading positions
2. Fundamental Overview
The pair dropped back closer to the 1.2100 round figure mark and was further pressurized by a modest uptick in the US Dollar, which extracted some support from a goodish pickup in the US Treasury bond yields. The greenback got an additional boost following the release of minutes of the July 30-31 FOMC meeting, which echoed the Fed Chair Jerome Powell’s post-meeting message that the 25 bps rate cut was a mid-cycle adjustment and not the start of a lengthy easing cycle. The minutes tempered expectations for an aggressive monetary easing by the Fed, though the market reaction turned out to be rather muted as investors preferred to wait for the Fed Chair Jerome Powell's scheduled speech at Jackson Hole on Friday before placing fresh directional bets.
Moving ahead, market participants now look forward to a Brexit-related meeting between the UK PM Boris Johnson and French President Emmanuel Macron for a fresh impetus. Given that Macron had said on Wednesday that there would be no renegotiation of the terms for Britain's exit from the EU, the meeting seems unlikely to provide any meaningful respite for the GBP bulls, rather any negative headlines will be enough to prompt some fresh selling around the Sterling and turn the pair vulnerable to resume its prior/well-established bearish trend.
GBPUSD FUNDAMENTALS TODAY
3. Latest News & Analysis
Themes affecting the GBP/USD
SPECIAL YEARLY GBPUSD FORECAST
The Brexit uncertainty remains the biggest challenge for UK. Sterling is expected to weaken at the beginning of 2019 and rebound sharply after the Brexit uncertainty fades away. Sterling is set to chart a check mark symbol in 2019. With the UK government still working its way to the UK parliament with the Brexit agreement approval, the Brexit uncertainty is set to prevail the end of 2018 and the beginning of 2019.
Influential Institutions & People for the GBP/USD
The Pound VS Dollar can be seriously affected by news or the decisions taken by two main central banks:
The Bank of England is the central bank of the United Kingdom. Established in 1694 and privately owned in the beginning, the Bank was nationalised in 1946 so now is completely owned by the UK government. BOE's main reason to be is to maintain monetary and financial stability in the country. Some of its other tasks are producing secure bank notes, operating asset purchase facility and keeping the inflation low and stable. The bank is overseen by the Court, named used to reffer the board of directors, and is accountable to Parliament and the public.
On the other
Mark Carney is Governor of the Bank of England and Chairman of the Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulation Authority. He joined the Bank on 1 July 2013. Carney was born in Canada in 1965 and graduated from Harvard with a bachelor's degree in Economics in 1988. In Oxford University, he also received a master’s degree and a doctorate both in Ecobomics in 1993 and 1995 respectively. Before becoming the Governor of the BOE, he worked as a Governor of the Bank of Canada (BOC) from February 1st. 2008 until June 3rd. 2013.
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
BOE NEWS & ANALYSIS
ECB NEWS & ANALYSIS
The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term originated in the mid-19th century, which makes it one of the oldest currency pairs.
Pound Dollar represents two economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, this pair has been suffering some turbulence due to risk related with the abandonment process from the European Union.
The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity of Euro Dollar is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.
Normally, the EUR/USD is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online.
The USD/JPY (or US Dollar Japanese Yen) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: EUR/USD, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD. Japanese Yen has a low interest rate and is normally used in carry trades. This is the reason why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.
Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when referred to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is due to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.