Cable bounced sharply this week, which has been expected as we saw pair in final stages of a corrective decline in wave B. A reversal to 1.2497 is strong, thus probably an impulse that will take this pair much higher in days ahead, especially after wave two pullback which can be a nice set-back to join the bullish rise for a big wave C up, while market trades above 1.1984 swing low.
Today's focus points
- A head and shoulder projection is being spoted by several analysts, such as Zak Mir, Technical Analyst, Tip TV and John Benjamin "To the upside, GBPUSD will be looking to target 1.2800 which is the minimum upside target of the inverse head and shoulders pattern.
- This technical view fits with Elliott projections from Chris Svorcik "The GBP/USD seems to be building an ABC zigzag (blue) and price is moving towards the Fibonacci levels of wave C vs A."
- Also Haresh Menghani highlights the 1.27 region by saying "...a clear break through 1.2540-45 confluence resistance now seems to pave way for continuation of the pair’s near-term upward trajectory, even beyond 1.2600 handle, towards 1.2650-55 intermediate resistance before eventually heading towards 50% Fibonacci retracement level resistance near 1.2700 round figure mark."
- Last but not the least, Thomas Light validates a bullish development with this view: "Such a robust rally from the flash crash lows could signal the start of an A,B,C,D ‘harmonic move’ higher. Should this harmonic move materialise it would complete at the 1.2750 resistance zone."
How is GBP/USD performing?
Pound's rally suffered a temporal interruption during London trading hours, but it was quickly reversed, with the GBP/USD pair closing the day around 1.2520, its highest settlement since mid December. The pair fell down to 1.2418, following news indicating that the UK's Supreme Court ruled against the government by an 8-3 margin in the Brexit case.
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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. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. 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 GBP/USD 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, GBP/USD has been suffering some turbulence due to risk related with the abandonment process from the European Union.
Most influential institutions for the GBP/USD
The Pound US Dollar can be seriously affected by the decisions taken by two main central banks:
The Bank of England (BoE)
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.
The European Central Bank (ECB)
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. The European Central Bank’s work is organised via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Mario Draghi, member of the Executive Board, is also the President of this organism.
Most influential people for the GBP/USD
Considering that the BOE and the Fed are the most influential institutions for the Pound US Dollar, it makes sense that its presidents, Mario Draghi and Mark Carney respectively, are the authorities with bigger effect on the currency pair.
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.
Mario Draghi is member of ECB's Executive Board and also the President of this organism. His declarations are an important source of volatility, especially for the Euro and the currencies traded against it. Born in 1947 in Rome, Italy, he graduated of the Massachusetts Institute of Technology and became President of the European Central Bank in 2011. Draghi gives press conferences in the back of how the ECB observes the current European economy. His comments may determine positive or negative trends for the Euro in the short-term. Usually, a hawkish outlook is seen as positive/bullish for the EUR, while a dovish one is seen as negative/bearish.
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.