British Pound: USD/GBP (GBP=X) flat as BoE decision ‘genuine toss up’
The pound is clinging to yesterday’s gains against the US dollar, leaving the pairing trading around $1.312. Sterling was able to hold onto Wednesday’s gains against the dollar thanks to the reduced odds of the Bank of England (BoE) cutting interest rates at next week’s gathering.
Tomorrow’s PMI data will remain in focus as it could help markets decide if the bank is likely to slash rates next week, or whether they will need to await further evidence of the British economy’s performance following December’s General Election. Yesterday’s GBP rally was supported by the latest Confederation of British Industry survey which revealed signs of improved confidence in the economy.
Commenting on this in a note, MUFG analysts wrote: “It is now up to the BoE to decide whether they want to allow more time to assess whether the UK economy rebounds as expected before deciding on providing more stimulus, or to pull the trigger now to help reinforce the expected recovery.”
They also added that the bank’s decision would be a “genuine toss up”.
Meanwhile, the safe-haven US dollar remained flat against the pound despite dampened risk appetite as markets worried the coronavirus would hurt domestic demand in China.
The number of deaths due to the virus has reached 17, and the number of reported cases jumped to 600 which caused China to lock down Wuhan where the outbreak is thought to originate.
The World Health Organisation (WHO) is set to decide later whether or not the situation will be declared a global health emergency.
Commenting on this, Commerzbank economist, Hao Zhou noted: “To cope with this risk, monetary policy could illustrate further easing bias. For the FX market, risk-off mode is likely to dominate for the time being.”
Meanwhile, trade tensions between the United Kingdom and the United States heated up after UK Chancellor Sajid Javid remained defiant at Davos.
After the Chancellor refused to cancel a new tax on tech firms, US Treasury Secretary Steven Mnuchin threatened fresh tariffs on UK carmakers.
Mr Javid also stirred tensions between the two countries after announcing that a trade deal between the UK and EU takes priority over one with the US after the country leaves the EU later in the month.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1.33.
The projected lower bound is: 1.29.
The projected closing price is: 1.31.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 26 white candles and 23 black candles for a net of 3 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 78.9281. This is not an overbought or oversold reading. The last signal was a sell 14 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 54.53. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 27 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 89. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.002 at 1.312. Volume was 26% below average (neutral) and Bollinger Bands were 40% narrower than normal.
Open High Low Close Volume___
1.314 1.315 1.309 1.312 76,089
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.30 1.31 1.27
Volatility: 7 9 9
Volume: 102,663 98,140 116,432
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 3.4% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 9 periods.