British Pound: USD/GBP (GBP=X) Holds Near Important Support Level

British Pound: USD/GBP (GBP=X) Holds Near Important Support Level

British Pound: USD/GBP (GBP=X) Holds Near Important Support Level

GBP/USD is showing resilience as it holds above a major technical level despite several recent developments.

Last week, several members of the Bank of England expressed their dovish views towards monetary policy and that easing might be needed to support the economy. Yesterday’s GDP report from the UK confirmed the views of the policymakers and further increased the odds that a rate cut is looming.

Despite this, GBP/USD has been able to hold below a horizontal level at 1.2975. Well, technically speaking, it is currently trading below it but it’s much too early to call it a downside break. The importance of the technical level is that it held the currency pair lower from around the middle of October until an eventual upward break in December. Technical traders will certainly have their eye on this level and make decisions based on the reaction from it.

While Sterling is showing some resilience, it is certainly not showing strength. The currency is down about three-quarters of a percent against the greenback in the week thus far and is the weakest among the major currencies. Traders will likely want to see a sign of strength from here before making an attempt at positioning long.

Later in the session today, the latest Consumer Price index figures will be released out of the United States. Analysts are expecting the index to have risen 0.2% last month and volatility is expected following the release.

Technical Analysis

The dollar is regaining some upward momentum in the early day although the price action that follows the CPI release will be important.

It will likely take a break above recent highs in the dollar index (DXY) to force a break of support in GBP/USD. DXY eased lower on Friday after the US jobs report came in a bit softer than expected. The index was once again under pressure on Monday but held to the range set out on Friday.

Technical Indicators

Overall, the bias in prices is: Sideways.

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 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.

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 22.2056. This is not an overbought or oversold reading. The last signal was a sell 7 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 46.62. 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 20 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 -107.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 13 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 up 0.003 at 1.302. Volume was 4% below average (neutral) and Bollinger Bands were 27% narrower than normal.

Open     High      Low     Close     Volume___
1.299 1.303 1.295 1.302 99,482
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.31 1.30 1.27
Volatility: 7 9 9
Volume: 95,172 97,416 118,553

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 2.6% above 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 moderate flows of volume out of GBP= (mildly bearish). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 2 periods.

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