British Pound: USD/GBP (GBP=X) Sterling Is Acting As Wild Card In A Coronavirus-Dominated Market

British Pound: USD/GBP (GBP=X) Sterling Is Acting As Wild Card In A Coronavirus-Dominated Market

British Pound: USD/GBP (GBP=X) Sterling Is Acting As Wild Card In A Coronavirus-Dominated Market

“Pound Sterling is acting as the wild card in a Coronavirus-dominated market, mostly reliant on investors’ mood when it comes to fiscal stimulus expectations ahead of the UK budget and UK-EU trade negotiations” say analysts at ING Bank on Sunday. “Next week, these two drivers will remain predominant, as the calendar offers very little in terms of market-moving data releases.”

GBP/USD Exchange Rate Falls as UK Economic Outlook Darkens

Last week saw the Pound to US Dollar (GBP/USD) exchange rate fluctuate on rising fears of a no-deal Brexit with the EU. The GBP/USD fell from highs of $1.301 to a low of $1.282 as Downing Street continued to harden its stance on negotiations with the EU ahead of June’s trade negotiations.

Paul Meggyesi, Head of Research at JP Morgan, was however mixed in his analysis, commenting:

‘GBP continues to perform idiosyncratically rather than as a traditional reserve currency… [However, the] risk of no-deal [Brexit] come December, which we continue to believe the market underappreciates and thus underprices, leaves a low ceiling for the currency, but considerable downside.’

Brexit developments continued to haunt UK markets and weaken Sterling, however, after comments from Downing Street indicated that the UK could walk away from UK-EU trade talks in June due to a lack of progress.

As a result, the GBP/USD exchange rate began to fall due to rising odds of a no-deal Brexit scenario following the end of the transition period, which ends in late December this year.

Friday saw the release of February’s UK GfK consumer confidence, which increased for its third month straight.

Joe Staton, Client Strategy Director at GfK, said:

‘Against a February backdrop of rising wages and house prices, low unemployment and stable inflation, we report another healthy uptick in consumer confidence this month.’

The GBP/USD exchange rate closed the week down by -0.8%, with rising coronavirus fears continuing to buoy the safe-haven US Dollar and no-deal Brexit fears weighing on market confidence in Sterling.

Looking Ahead

US Dollar (USD) investors will be looking ahead to Monday’s release of February’s ISM Manufacturing PMI, which is expected to dip from 50.9 to 50.5. Any unexpected increase, however, could further buoy the USD/GBP exchange rate.

Sterling investors will be awaiting Monday’s UK Markit Manufacturing PMI for February. If this improves we could see the Sterling claw back some of its losses against its peers.

Wednesday’s UK Markit Services PMI for February will also give some indication for the direction of the British economy. We could see the GBP/USD exchange rate begin to edge higher if the UK’s largest sector continues to show improvement.

Thursday’s US jobs reports will also remain in focus for USD investors this week. If these show a deterioration in February, however, we could see the ‘Greenback’ suffer.

The GBP/USD exchange rate could claw back some of its losses on Friday if February’s US nonfarm payrolls confirm consensus and sink from 225 thousand to 178 thousand.

Brexit will continue to dominate headlines next week, with GBP falling if the UK continues to maintain its hard stance on EU trade negotiations.

The coronavirus will also continue to remain in focus for US Dollar investors. Any further signs of it having a negative impact on the US economy would weaken the ‘Greenback’ and raise the odds of a rate cut from the Federal Reserve.

Technical Indicators

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.30.

The projected upper bound is: 1.30.

The projected lower bound is: 1.26.

The projected closing price is: 1.28.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 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 28.4563. This is not an overbought or oversold reading. The last signal was a sell 9 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 38.68. 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 54 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 -174.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 7 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed down -0.001 at 1.281. Volume was 96% below average (consolidating) and Bollinger Bands were 29% narrower than normal.

Open     High      Low     Close     Volume___
1.280 1.282 1.276 1.281 4,514
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: 9 9 10
Volume: 104,586 100,860 111,388

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 0.9% 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 36 periods.

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