British Pound: USD/GBP (GBP=X) New BoE Governor Doesn’t See Urgency for Rate Cut

British Pound: USD/GBP (GBP=X) New BoE Governor Doesn’t See Urgency for Rate Cut

British Pound: USD/GBP (GBP=X) New BoE Governor Doesn’t See Urgency for Rate Cut

The Federal Reserve felt that the potential damage the Coronavirus might have warranted a larger than usual emergency 50 basis point rate cut earlier this week.

Andrew Bailey, who will be replacing BoE Governor Mark Carney on March 18, said yesterday that more evidence is needed on the Coronavirus before making a policy decision, indicating he did not see the urgency in the same manner the Fed does.

The futures markets continued to price in expectations for a rate cut at the March 26 BoE meeting, although the British pound has managed to break higher from a range on the recent view from the upcoming BoE Governor.

While the bank has indicated it is not likely to make a move ahead of its scheduled meeting, Bailey commented that the BoE has room to move the interest rate down to 0.1% from the current rate of 0.75%, if need be.

In the week thus far, the Reserve Bank of Australia, the Fed, and the Bank of Canada have all reduced their interest rates in response to the Coronavirus outbreak. The Bank of Canada slashed rates by half a percent which was its first rate cut since May 2015.

GBP/USD has broken upward from a consolidation that had contained it for the first half of the week. In the process, the pair has scaled above a horizontal level at 1.2850.

The recent price action points to a clear bullish trend over the near-term.

The horizontal level at 1.2850 is now seen as strong support in the session ahead.

Overhead resistance for the pair is seen at 1.2961 which is a level that has been well-respected since October. Further, the 200 moving average on a 4-hour chart is converging toward the level to create a resistance confluence. This indicator served to hold the pair lower on two recoveries last month.

Bottom Line

  • GBP/USD has broken higher from a range after the Bank of England said it did not see the urgency in a rate cut.
  • The pair has reversed into a bullish near-term trend. Resistance at 1.2961 is important, a break of it can signal that a broader recovery is taking place.

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: 1.31.

The projected lower bound is: 1.27.

The projected closing price is: 1.29.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

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 59.3620. This is not an overbought or oversold reading. The last signal was a buy 2 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 48.75. 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 57 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 -1. This is not a topping or bottoming area. The last signal was a buy 1 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 10 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.005 at 1.292. Volume was 6% below average (neutral) and Bollinger Bands were 13% narrower than normal.

Open     High      Low     Close     Volume___
1.287 1.294 1.286 1.292 96,083
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.29 1.30 1.27
Volatility: 10 10 10
Volume: 118,552 105,084 111,465

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 1.7% 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 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 39 periods.

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