British Pound: USD/GBP (GBP=X) heightened risk of reversal
Pound Sterling is beginning to look a great deal more resilient against the Euro, even with the news out over the past 24 hours that parliament has failed in its latest attempts to ensure a ‘no deal’ Brexit is avoided on October 31.
The Pound-to-Euro exchange rate now looks to be settling into a nest in the mid 1.12s: on Thursday morning the exchange rate is quoted at 1.1231, the week’s low is at 1.1193.
The question those looking to buy Euros will be asking is how far any bounce-back can go, and whether it will last a decent amount of time?
Our suspicion is that any strength will be limited in both duration and extent: the 1.17s that we saw in late-April / early-May have certainly passed, and at best some side-ways orientated trade can be expected.
We hear from a foreign exchange strategist that the Euro might struggle to strengthen against Sterling much from here. According to Ned Rumpeltin, European Head of FX Strategy at TD Securities, the 1.1198/1.1180 zone could provide decent support for Sterling “and we would not be surprised to see a correction.”
Any correction higher could take the Pound-to-Euro exchange rate towards resistance located around 1.1312 ahead of the 1.1396 region says Rumpeltin who expects any bounces in Sterling as likely to be only “modest” in nature.
This week’s nascent recovery in Sterling comes in part on the back of stronger-than-forecast labour market data out on Tuesday which showed wages are growing at their fastest rate since 2008.
The currency meanwhile appears to have fully digested the prospects of Boris Johnson assuming the office of Prime Minister at the end of July.
The Brexiteer’s commanding lead in the leadership race were confirmed on Thursday when the results of the first round of the leadership selection process were announced:
- Johnson 114
- Hunt 43
- Gove 37
- Raab 27
- Javid 23
- Hancock 20
- Stewart 19
- Leadsom 11
- Harper 10
- McVey 9
The bottom three candidates are now out of the race.
“No major surprises in the first round, relative to public declarations. Switching of support from Leadsom and McVey should help cement Boris’ big lead. Race to be the other candidate to take on Boris looks wide open; unclear how Remain wing will consolidate,” says Samuel Tombs, an economist with Pantheon Macroeconomics.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 1.28.
The projected lower bound is: 1.25.
The projected closing price is: 1.27.
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 19 white candles and 31 black candles for a net of 12 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 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 25.5317. This is not an overbought or oversold reading. The last signal was a buy 15 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 41.49. 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 buy 10 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 10. This is not a topping or bottoming area. The last signal was a sell 4 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 8 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed up 0.001 at 1.268. Volume was 94% below average (consolidating) and Bollinger Bands were 66% narrower than normal.
Open High Low Close Volume___
1.267 1.269 1.267 1.268 10,297
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.27 1.29 1.29
Volatility: 5 6 10
Volume: 124,355 142,768 172,971
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 2.0% below its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 22 periods.