British Pound: USD/GBP (GBP=X) Edges Higher on March Budget Optimism

British Pound: USD/GBP (GBP=X) Edges Higher on March Budget Optimism

British Pound: USD/GBP (GBP=X) Edges Higher on March Budget Optimism

The Pound US Dollar (GBP/USD) exchange rate climbed last week, with the pairing fluctuating between lows of $1.287 to highs of $1.3065 after Jerome Powell, the Chair of the US Federal Reserve, warned that China’s coronavirus could begin to have a negative effect on the American economy.

Jerome Powell commented:

‘We [the Federal Reserve] are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.’

However, the US Dollar (USD) managed to hold onto some of its previous week’s gains after the stronger-than-expected US nonfarm payrolls report showed a 225,000 increase for the month.

Market safe-haven appeal for the ‘Greenback’ also began to slip last week, with concerns rising over China’s coronavirus outbreak negatively impacting the supply chain and having a knock-on effect America’s trade-reliant economy.

The US Dollar (USD) also failed to benefit from the year-on-year inflation report for January, which fell below forecasts from 0.2% to 0.1%.

Chris Rupkey, Chief Economist at MUFG in New York, was upbeat in his analysis, commenting:

‘There is not no inflation out there and with unemployment claims remaining at low full-employment levels, inflation pressures will continue to build.’

The US Dollar (USD) edged higher on Friday, however, after January’s US retail sales report for January rose from 0.2% to 0.3%.

GBP/USD Outlook: Could Sterling Rise on a Positive UK Services PMI?

Sterling traders will be looking ahead to Tuesday’s release of December’s UK ILO Unemployment Rate report, which is forecast to remain at 3.8%. If the UK’s unemployment rate rises, however, we could see the Pound begin to sink on rising concerns for the UK economic outlook.

Tuesday will also see the release of the UK’s average earnings report for December, which is expected to ease from 3.2% to 3.1%.

We could see the GBP/USD exchange rate sink On Wednesday if January’s UK inflation gauge falls below forecast, as this would exacerbate concerns of a flagging UK economy in the near-term.

US Dollar (USD) investors will be awaiting Wednesday’s Federal Open Market Committee meeting. Any dovish comments about the American economy, however, would weaken market appetite for the ‘Greenback’.

Looking ahead to Friday, we could see the Pound begin to rise if the UK Markit Services PMI improves in February. With services being Britain’s largest sector, any signs of improvement would prove Pound-positive.

US markets will be paying close attention to Friday’s publication of the flash US Markit PMI Composite figure for February. If there is any further indications of an improving American economy we could see the US Dollar begin to rise against the Pound.

Technically, GBP/USD outlook looks constructive say FX analyst at Scotiabank, Shaun Osborne.

“Short term gains have stalled around 1.3065/70 and intraday patterns suggest some softness creeping into Cable price action ahead of the weekend and long positions square up. The 40-day MA (1.3049) is curbing GBP gains and short-term price patterns look a little negative through European trade, suggesting a push back to—or just below—1.30 may develop near-term. Broader trend are constructive and we look for solid support on dips.”

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.30.

The projected upper bound is: 1.32.

The projected lower bound is: 1.28.

The projected closing price is: 1.30.

Candlesticks

A white body occurred (because prices closed higher 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 24 white candles and 26 black candles for a net of 2 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 86.4110. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 3 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 51.20. 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 44 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 41. This is not a topping or bottoming area. The last signal was a buy 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed down -0.001 at 1.304. Volume was 95% below average (consolidating) and Bollinger Bands were 33% narrower than normal.

Open     High      Low     Close     Volume___
1.303 1.305 1.303 1.304 4,913
Technical Outlook 
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: 6 10 9
Volume: 98,014 99,377 112,564

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.

Summary

FOREX GBP= is currently 2.7% 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 26 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

Latest posts by HEFFX Australia (see all)