US Outlook In Focus For British Pound: USD/GBP (GBP=X) Rates With Key Data Incoming

US Outlook In Focus For British Pound: USD/GBP (GBP=X) Rates With Key Data Incoming

US Outlook In Focus For British Pound: USD/GBP (GBP=X) Rates With Key Data Incoming

Despite last week’s safe haven demand and signs of resilience in US data, the British Pound to US Dollar (GBP/USD) exchange rate ultimately avoided losses and spent the late-week climbing higher. Market optimism around the Bank of England (BoE) outlook, combined with Brexit anticipation, kept the Pound appealing. Meanwhile US Dollar investors await key US data and further developments in global risk sentiment.

After opening last week at the level of 1.3072, GBP/USD spent much of the week trending lower and even dipped below the key level of 1.30 on occasion.

However, following the Bank of England (BoE) decision on Thursday the Pound enjoyed a jump in demand that helped it rally well into Friday’s session. GBP/USD trended near a 3 week best of 1.3155 on Friday afternoon, though analysts warned Sterling gains could be temporary.

The Bank of England’s January policy decision was held last Thursday. Before the decision, markets had bets around 50/50 that the bank could cut UK interest rates due to concerns about Britain’s economic outlook.

However, the BoE left monetary policy frozen with a vote of 7-2 – the same split vote as the bank’s previous decision.

While the bank did cut its UK growth forecasts, the lack of signs that policymakers were becoming more dovish meant the bank was ultimately seen as less dovish than expected. This led to a jump in Pound demand after the decision, which lasted through Friday.

However, investors remain anxious about Britain’s outlook. Now that Britain has left the EU, focus will shift back to UK-EU negotiations for the next stage of Brexit. The BoE has also indicated that a UK interest rate cut remains a possibility in the coming months.

Pound Sterling Outlook Could be Knocked if PMIs Disappoint

Brexit has taken place and the transition period has begun. However, until the next phase of UK-EU negotiations begins, Brexit uncertainty may only have a limited impact on the Pound’s outlook.

However, as the Bank of England (BoE) left the door open for a potential UK interest rate cut during last week’s policy decision, the Pound could shed much of its recent strength if Britain’s economic outlook shows fresh signs of weakness.

Britain’s final January manufacturing PMI will be published on Monday, with construction following on Tuesday and services and composite stats on Wednesday.

If these stats fall short of expectations, they could worsen concerns that Britain’s economy isn’t seeing much of a rebound. This would cause BoE interest rate cut bets to rise and the Pound to fall.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 1.34.

The projected lower bound is: 1.30.

The projected closing price is: 1.32.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 25 white candles and 25 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 81.0729. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 21 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 57.89. 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 34 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 165.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 9 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 buy 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed down -0.003 at 1.317. Volume was 98% below average (consolidating) and Bollinger Bands were 51% narrower than normal.

Open     High      Low     Close     Volume___
1.321 1.321 1.317 1.317 1,559
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.31 1.31 1.27
Volatility: 8 9 9
Volume: 92,596 97,189 114,045

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 3.8% 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 0 periods.

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