British Pound: USD/GBP (GBP=X) eyes manufacturing data and Bank of England

British Pound: USD/GBP (GBP=X) eyes manufacturing data and Bank of England

British Pound: USD/GBP (GBP=X) eyes manufacturing data and Bank of England

It is a busy start to the new month for Pound Sterling with some key manufacturing data on the docket as well as the Bank of England (BoE) interest rate decision and inflation report. While politics remains the main driver of Sterling values, we could see some short-term volatility introduced to the market by the economic calendar.

At 09:30 B.S.T. it was reported the UK manufacturing PMI for July read at 48, unchanged on the previous month’s reading, but above the 47.7 expected by markets.

Because the actual result came in so close to the consensus expectation, the impact on Sterling is likely to be minimal: recall currencies tend to react to sizeable data surprises.

The Manufacturing PMI is nevertheless still stuck down at a 6-year low, as UK manufacturers “faced the ongoing headwinds of political uncertainty, a global economic slowdown and the unwinding of stocks built prior to the original Brexit date,” report IHS Markit, compilers of the survey.

IHS Markit add:

“Manufacturing production fell to the greatest extent in seven years, as companies scaled back output in response to a further solid decrease in new order intakes. Demand was weaker from domestic and overseas markets. The decline in new export business mainly reflected lower intakes from the EU and China.”

The data will only add to the sombre assessment of the UK economy at a time of rising political intrigue, and should maintain the negative tone to trade in Sterling.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 1.26.

The projected upper bound is: 1.23.

The projected lower bound is: 1.20.

The projected closing price is: 1.21.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.

Separating lines occurred. If the lines occur during an uptrend and the first line is black and the second is white (which is not the case with FOREX GBP=) then this suggests that the uptrend should continue.

If the separating lines occur during a downtrend (which appears to be the case with FOREX GBP=) and the first line is white and the second is black (which is the case with FOREX GBP=) then this suggests that the downtrend should continue.

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 11.2606. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 16 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 26.29. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 16 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 -150.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 6 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 sell 4 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed down -0.002 at 1.214. Volume was 10% below average (neutral) and Bollinger Bands were 59% wider than normal.

Open     High      Low     Close     Volume___
1.215 1.217 1.208 1.214 124,131

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period     50-period     200-period
Close: 1.23 1.26 1.28
Volatility: 8 8 10
Volume: 114,711 125,008 162,718

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 5.5% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 17 periods. Our momentum oscillator is currently indicating that GBP= is currently in an oversold condition. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.

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