British Pound: USD/GBP (GBP=X) Politics and a Stronger Dollar
With GBP/USD turning lower over the past day or so, the question is what is driving the currency pair? Is it UK politics or just a stronger dollar?
In a debate between PM Boris Johnson and opposition Labour’s Corbyn yesterday, polls continued to favor Johnson, although by a small margin. Johnson’s stance is to deliver on the Brexit deal that was negotiated in October. Corbyn vows to let the public decide what the UK will do from here.
Either scenario involves further delays. Holding a referendum to let the public decide on the fate of Brexit could potentially take up to a year. On the other hand, Corbyn argued yesterday that even if a Brexit deal is made in January, trade negotiations are also likely to be a lengthy process.
It seems a bit unclear how much UK politics have impacted GBP/USD as the pair has carried a fairly strong inverse correlation with the US Dollar index (DXY) as of late. DXY bottomed out to start the week and has been gaining upward momentum since. Similarly, GBP/USD hit a fresh four-week high this week and has since pared gains.
In making those highs, GBP/USD broke upward from a declining trendline that originates from a peak posted in late October.
In yesterday’s forecast, I outlined a few different scenarios that could play out. One of them was a sell off that would see the pair printing a bearish engulfing candle on a daily chart. This is where we are now.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1.31.
The projected lower bound is: 1.27.
The projected closing price is: 1.29.
A black body occurred (because prices closed lower 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 25 white candles and 24 black candles for a net of 1 white candles.
A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).
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 67.7418. This is not an overbought or oversold reading. The last signal was a sell 1 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 60.84. 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 21 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 58. This is not a topping or bottoming area. The last signal was a sell 1 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 sell 16 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.000 at 1.292. Volume was 19% below average (neutral) and Bollinger Bands were 64% narrower than normal.
Open High Low Close Volume___
1.292 1.293 1.288 1.292 91,211
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.29 1.27 1.27
Volatility: 6 11 10
Volume: 95,859 108,752 134,227
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 1.7% above its 200-period moving average and is in an upward 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 bullish on GBP= and have had this outlook for the last 27 periods.