gbp/usd

Expect the Bank to drop its tightening bias

Financial markets expect the Bank Rate to be one percentage point lower in two or three years' time than was the case in November. That will have important ramifications for the Bank’s two-year inflation forecast, which is seen as a barometer of whether markets have got it right on the level of rate cuts priced. Previously, the Bank’s model-based estimate put headline inflation at 1.9% in two years’ time, or 2.2%, once an ‘upside skew’ is applied. We wouldn’t be surprised if this ‘mean’ forecast (incorporating an upside skew) is still a little above 2% in the new set of forecasts. And if that’s the case, it can be read as the BoE subtly pushing back against the quantity of rate cuts markets are pricing in.

If that happens, we suspect markets will largely shrug it off. The bigger question is whether the Bank makes any changes to its statement – and its forward guidance currently reads like this:

    Policy needs to stay â€

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Intraday Market Analysis – GBP In Key Supply Zone

Intraday Market Analysis – GBP In Key Supply Zone

Jing Ren Jing Ren 25.10.2021 09:22
The sterling hit the brakes after the UK’s retail sales fell for the fifth month in a row in September. The pair has been inching up towards the hurdle on the daily chart (1.3900). The RSI’s bearish divergence, however, shows less enthusiasm from buyers as the price approaches the major resistance. Sentiment remains bullish but we can expect profit-taking. 1.3710 would be the first support to monitor in case of retracement. On the upside, a bullish breakout may trigger an extended rally to 1.4000 and signal a potential reversal. The sterling hit the brakes after the UK’s retail sales fell for the fifth month in a row in September. The pair has been inching up towards the hurdle on the daily chart (1.3900). The RSI’s bearish divergence, however, shows less enthusiasm from buyers as the price approaches the major resistance. Sentiment remains bullish but we can expect profit-taking. 1.3710 would be the first support to monitor in case of retracement. On the upside, a bullish breakout may trigger an extended rally to 1.4000 and signal a potential reversal. CADJPY hits 6-year high The Canadian dollar slipped despite solid retail sales numbers in August. The pair has come under pressure at a six-year high (93.00). A bearish RSI divergence indicates a loss of momentum as the bulls proceed with caution in this key supply zone. A repeatedly overbought situation has been calling for a consolidation and might limit their risk appetite. A break below 91.80 would prompt more buyers to bail out. The psychological level of 91.00 from last June’s peak would turn into the second line of defense.  GER 40 tests daily resistance The DAX 40 found support after Germany’s manufacturing PMI beat the consensus. The latest rally above the 30-day moving average is a strong bullish signal. And after a brief horizontal consolidation, the index is climbing towards the key hurdle at 15700. A bullish close above this daily resistance would throw the bears off balance. A combination of short-covering and momentum buying may heighten volatility. This is a prerequisite before the uptrend could resume. On the downside, 15400 is the immediate support in case of a pullback.
Supply Trends Resurface: Analyzing the Impact on Market Dynamics

Can British Pound To US Dollar (GBP/USD) Reach 2-year-low? NZD/USD Doesn't Seem To Be Improving And US 100 Sends A Small Recovery Signal

Jing Ren Jing Ren 13.05.2022 07:46
GBPUSD to reach 2-year lows The pound remained under pressure after a slowdown in the UK’s GDP growth in Q1. A break below the lower range (1.2260) of a brief consolidation signalled a bearish continuation. Sterling is heading towards its two-year low at 1.2100. Short-covering could be expected and in conjunction with dip-buying could drive the price up momentarily. 1.2400 is the first resistance and the bulls need to lift the recent high at 1.2640 before they could regain control. Otherwise, the psychological level of 1.2000 would be the next stop. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM NZDUSD grinds lower The New Zealand dollar tumbles as traders continue to pile into safe haven assets. The sell-off accelerated after the pair sank below June 2020’s lows near 0.6400. Downbeat sentiment may attract more trend followers after a faded rebound. 0.6100 near a two-year low would be the next target. 0.6370 is a fresh resistance and the bears may sell into strength at the next bounce. The support-turned-resistance at 0.6450 sits next to the 20-day moving average and is a major level to clear before a reversal could materialise. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM US 100 may see limited bounce The Nasdaq 100 struggles to find bottom as investors continue to flee risk assets. The index sees no sign of stabilisation yet as it approaches 11500. The price action has been capped by a falling trend line from last April. An oversold RSI may prompt sellers to take profit and possibly trigger a mean reversion trade to the upper band (13000) of the line. A break above 12400 may attract enough buying interest to make this happen, but the rebound could be limited unless the bulls succeed in pushing higher. Read next: Binance Academy: Crypto Fear And Greed Index Explained| FXMAG.COM
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

(GBP/USD) British Pound Dips On Soft GDP (Gross Domestic Product) | Oanda

Kenny Fisher Kenny Fisher 12.05.2022 21:09
The pound continues to lose ground and is trading at its lowest level since May 2020. GBP/USD fell below the 1.22 level earlier and hasn’t had a daily winning session since May 4th. Negative growth raises alarm bells The UK economy is struggling, a grim fact which was brought home by the Q1 GDP report earlier today. On a quarterly basis, GDP came in at 0.8%, down from 1.3% in Q4 of 2020 and shy of the 1.0% estimate. Even worse, the economy contracted in March by 0.1%, after a 0.1% gain in February. This missed the forecast of 0.0%. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM The BoE has raised rates to 1.0%, a 13-year high, but it’s clear that the BoE has fallen behind the inflation curve and is playing catch-up The negative growth reading was a result of the crushing inflation that has gripped the UK. CPI hit 7% in March and the markets are braced for a reading of around 9% from week’s April CPI release. The cost of living crisis has dampened consumer spending, a key reason for the negative reading for March GDP. The BoE has raised rates to 1.0%, a 13-year high, but it’s clear that the BoE has fallen behind the inflation curve and is playing catch-up. At last week’s policy meeting, the central bank warned that inflation could top 10% and there was the danger of a recession. The pound tumbled over 2% in response, even though the BoE increased rates by 0.25%. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM The grim economic outlook does not bode well for the pound, which has tumbled 7.1% since May 1st The BoE finds itself between a rock and a hard place. It needs to raise rates in order to curb soaring inflation, but weak growth means that the higher rates could tip the economy into recession. The grim economic outlook does not bode well for the pound, which has tumbled 7.1% since May 1st. Read next: (BTC) Bitcoin’s Price Tanks Along With Equities. U.S. Stock Market Awaits CPI Report, Poor Performance From The FTSE 100. US inflation eases, a bit US inflation weakened in April, but not as much as the markets had expected. CPI dropped from 8.5% to 8.3%, higher than the consensus of 8.1%. This slowdown was not enough for the markets to price in “peak-US inflation”, and the dollar managed to hold its own against the major currencies. There had been talk of an “inflation peak”, but the inflation data indicates that even if inflation is falling, the pace could be much slower than the markets would like. GBP/USD Technical GBP has breached support at 1.2199 for the first time since May 2020. Below, there is support at 1.2056 GBP/USD faces resistance at 1.2272 and 1.2418 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Economic Calendar For July 21st. EUR/USD And GBP/USD - Trading Ideas

(GBP) British pound’s woes continue | Oanda

Kenny Fisher Kenny Fisher 13.05.2022 15:29
The British pound can’t seem to find its footing. GBP/USD hasn’t had a daily winning session since May 4th and closed on Thursday below the 1.22 line, for the first time since May 2020. In the European session, the pound is trading quietly at the 1.22 line. Recession fears, negative growth weighing on sterling The UK treated the markets to a data dump on Thursday, but the news was not positive. UK growth for Q2 showed a 0.8% gain, down sharply from 1.3% in Q4 of 2020 and missing the 1.0% estimate. In March, the economy contracted by 0.1%, compared to a 0.1% gain in February and shy of the estimate of 0.0%. Investors never like to hear the phrase ‘negative growth’ and the March GDP report pushed the pound lower on Thursday.  There was more bad news as Industrial Production, Manufacturing Production and Business Investment all slowed down and posted negative readings. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM The UK continues to grapple with spiralling inflation, and the BoE has warned that things could get even worse. CPI hit 7%  The BoE has raised rates to 1.0%, a 13-year high, but it will take time for higher interest rates to take a bite out of inflation. At last week’s policy meeting, the central bank warned that inflation could top 10% and there was the danger of a recession. The pound tumbled over 2% in response and has fallen another 125 points since then. Risk is tilted to the downside for the pound, which has tumbled about 7% since the beginning of April. Fed’s Powell confirmed by Senate Fed Chair Powell was overwhelmingly nominated for a second term on Thursday by the US Senate. Powell appears committed to delivering 0.50% rate hikes at the next two meetings, although there has been talk of a super-size 0.75% hike in order to curb soaring inflation. US inflation finally slowed in April, but the reading of 8.3% (8.5% prior) was hardly what the markets were looking for, and talk of an “inflation peak” proved to be premature. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM GBP/USD Technical 1.2199 remains under pressure in support. Below, there is support at 1.2056 GBP/USD faces resistance at 1.2272 and 1.2418 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

(EUR/USD) Hopes Of A Hawkish ECB Shows Favour To The Euro, (EUR/GBP) UK CPI Inflation Data Knocks The Pound Sterling - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 18.05.2022 13:55
Summary: The Euro claws back marginally against the USD. UK CPI inflation data knocks the Pound Sterling against both the Euro and The USD. USD/CAD bearish. Read next: (EUR/USD, EUR/GBP) Euro Strengthens In The Wake Of Villeroys Comments On Monday, (AUD/JPY), (GBP/USD) Pound Sterling Showing Strength - Good Morning Forex!  EUR showing signs of potential recovery Market sentiment for this currency pair is showing bullish signals on Wednesday. The Euro gained 1.1% on the USD overnight, however it lost more than 0.3% during the trading day on Wednesday. In general, investor confidence has been returning to the market, this has been helped by the fact that U.S retail sales rose in April. It seems as though the Fed will continue to tighten monetary policy in conjunction with expectations that the European Central Bank (ECB) will turn hawkish after representative Klaas Knot suggested an interest rate hike is on the table. EUR/USD Price Chart UKs CPI Inflation knocks the Pound Sterling The market sentiment for this currency pair is showing bearish signals. The Euro has gained on the GBP after UKs headline CPI inflation rate came out at 9% for April, which beat market expectations, however is still up 2% from March. The most recent data for the UK economy did not shock the markets, therefore, the long-term effect of this data is unlikely to have a big effect on the Pound Sterling. At the last policy-setting meeting, the Bank of England (BoE) pushed interest rates up by 1%, the recent CPI inflation data suggests that the BoE will likely need to continue tightening their monetary policy. EUR/GBP Price Chart USD/CAD currency pair The USD/CAD currency pair is signalling bearish market sentiment, this bearish sentiment is not expected to continue for long in the future. With the hawkish Fed fighting inflation, the USD is expected to get stronger going forward. USD/CAD Price Chart Pound Sterling loses to the US Dollar The market sentiment is showing bullish signals for this currency pair, however the GBP has weakened against the USD on Wednesday. The weakening of the Pound Sterling comes after the release of CPI inflation data. GBP/USD Price Chart Read next: (EUR/USD, EUR/GBP, EUR/CHF) ECBs Hint To Raise Interest Rates Offers Some Relief For The Euro - Good Morning Forex!  Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

(EUR/USD, EUR/GBP) Market Participants Betting On A More Hawkish ECB, A Dovish BoJ Weighs On The Safe-Haven Currency (USD/JPY) - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 19.05.2022 12:39
Summary: The market sentiment for the EUR/USD currency pair turns mixed. Inflation and economic data weighing on the GBP. BoJ continues to fight rising interest rates. AUD strengthens amidst favourable unemployment data. The market seems to be favouring the Euro for a change The market is signalling mixed market sentiment for this currency pair. The U.S dollar lost ground to the EUR during Thursdays early trading, however, the demand for the safe-haven asset remains steady due to investor risk sentiment still being fragile. Earlier this week the Fed announced they would push interest rates as high as necessary to fight the surging inflation. On Thursday the market is waiting for the minutes from the latest European Central Bank (ECB) meeting to be released, hoping there will be an indication of a tightening in monetary policy. Read next: (EUR/USD) Hopes Of A Hawkish ECB Shows Favour To The Euro, (EUR/GBP) UK CPI Inflation Data Knocks The Pound Sterling - Good Morning Forex!  This begs the question: despite the Fed's already hawkish monetary policy, why is the market not pricing in much for the hawkish Fed, but pricing in a lot for the European Central Bank (ECB) ? EUR/USD Price Chart BoE and ECB expected to raise interest rates The market is reflecting a mixed market sentiment on Thursday. Earlier in the trading week, UK economic data releases weighted on the value of the Pound Sterling, global investor sentiment and the current equity bear market are both aspects that could mean further losses for the GBP. Earlier on in the trading week, the GBP gained on both the Euro and the US Dollar, but a midweek sentiment turn around has bought the Pound Sterling back down. Both the ECB and the Bank of England (BOE) are expected to raise interest rates. EUR/GBP Price Chart Follow FXMAG.COM on Google News! USD continues to beat the JPY The Japanese yen seems to be an underperformer in the past week, perhaps this is due to the rising U.S yields by the Fed amidst the Bank of Japan (BoJ) fighting against tightening their monetary policy. Should the market face a big risk-off sentiment, the JPY might see some gains, however in this currency pair, it may not be noticeable due to the USD also being seen as a safe-haven currency. USD/JPY Price Chart AUD regains some investor confidence Market sentiment for this currency pair is bullish. Investor confidence has increased in the Australian Dollar after the unemployment rate for April came in at 3.9% which not only exceeded market expectations but is also the lowest rate since the 1970s. AUD/JPY Price Chart Read next: (EUR/USD, EUR/GBP) Euro Strengthens In The Wake Of Villeroys Comments On Monday, (AUD/JPY), (GBP/USD) Pound Sterling Showing Strength - Good Morning Forex!   Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
GBP/USD: Bearish Outlook Prevails Amidst Lack of Fundamental Drivers

British pound (GBP/USD). Sterling falls below 1.23!

Kenny Fisher Kenny Fisher 06.05.2022 12:22
The British pound has stabilized on Friday, after sustaining huge losses a day earlier. GBP/USD is trading at 1.2342 in the European session, down 0.11%. Earlier, the currency fell to 1.2276, its lowest level since June 2020.   BoE warning chills the pound The BoE dutifully raised interest rates at its meeting on Thursday, but the market reception was a chilly one. GBP/USD plummeted a staggering 2.21% on the day. Investors gave a thumbs-down to the grim message from the central bank, as a fourth straight rate hike in as many meetings became an afterthought. The BoE’s growth forecast for 2022 remained at 3.75%, but it slashed the 2023 projection from 1.25% to -0.25%. At the same time, the central revised upwards its inflation forecast for Q4 to above 10%, up from 8% in an April forecast. The ‘double-whammy’ of higher rates and a deteriorating economic outlook sent the British pound reeling after the BoE meeting. The rate decision was a 6-3 vote, with all three dissenters voting in favor of a 0.50% rate hike. This surprised the markets, which had expected an 8-1 vote. There is a deep split in the MPC, with Governor Bailey acknowledging after the meeting that an uncertain economic outlook had led to a range of views in the MPC. Such a statement can hardly be expected to instill confidence in the markets. In its policy summary, the BoE signalled that more rate hikes are coming, and also dropped the word “modest” to describe upcoming rate hikes. Yet the markets were not impressed  – the 0.25% was modest, and with the BoE warning about 10% inflation, it’s clear that it will take quite some time before rate hikes do the job and wrestle down sizzling inflation. The US dollar initially lost ground after the Fed rate decision on Wednesday, as investors seized on Fed Chair Powell’s statement that the Fed was not considering a 0.75% rate hike. The greenback has since bounced back, as the markets digest that the Fed plans to be aggressive with further 0.50% hikes in its battle to bring down inflation.   GBP/USD Technical There is resistance at 1.2612 and 1.2719 GBP/USD tested support at 1.2272 in the Asian session. Below there is support at 1.2179           This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

UK Average Earnings Index + Bonus Beats Market Expectations

Rebecca Duthie Rebecca Duthie 11.10.2022 08:24
Summary: The UK average earnings index + bonus came in bullish/bearish. The GBP is predicted to avoid reaching parity with the USD but will continue to trade at historically low levels. UK Average Earnings beat market expectations For August 2022, the rate of UK Average Earnings Index + Bonuses was 6.0% and the rate for unemployment was 3.5%. The rates of growth in both total and regular pay are comparable, which has not been the case for a while. The market expectation for the UK average earnings index + bonus was set at 5.9%, the UK succeeded in beating the market's expectations for the month of August. The reading showed a higher than expected Average Earnings Invex and should be interpreted as bullish or positive for the pound. The Average Earnings Index tracks changes in the amount that the government and businesses are willing to pay for labor, including bonuses. The Average Earnings figure provides us with a good indicator of the growth in personal income for the particular month. UK Average Earnings effect on the economy Highlights from the most recent survey reveal that over the rest of the year and into early 2023, the pound is predicted to avoid reaching parity with the dollar but will continue to trade at historically low levels. The U.K. economy has been running out of workers, even as it slows considerably under the weight of the ongoing cost-of-living problem, according to figures released for the month of July. According to the Office for National Statistics, employment growth slowed significantly in the three months leading up to July as the labor pool dried up due to the summer's heat waves and the pandemic's aftereffects. However, now it seems that the UK economy is a little more well supported. Higher than expected data indicates that the Bank of England's tightening of monetary policy is having some sort of an impact on wages, which, however, are still growing too slowly to keep up with the still-rising annual inflation rate. The initial market reaction to the release of this data showed the pound sterling weaken against the EUR and the USD. Sources: investing.com, ons.gov.uk, poundsterlinglive.com
The Cable Market (GBP/USD) Is Likely To Show Signs Of A Bullish Trend

GBP/USD - Lack of US data and US Redbook didn't support US dollar

FXStreet News FXStreet News 28.12.2022 16:34
GBP/USD is back above the 1.2100 figure, courtesy of the US Dollar weakness. China’s relaxing Covid-19 restrictions keep sentiment positive. GBP/USD> Testing the 20 and 200-DMAs, on its way toward 1.2200. The Pound Sterling advances sharply following a European choppy trading session, bouncing off the day’s lows around 1.2000, posing a challenge to the 1.2100 figure in the New York session. At the time of writing, the GBP/USD is trading at 1.2108. Improvement in sentiment weighs on the USD Investors’ mood is mixed amidst the North American session. The lack of US economic data, with the US Redbook released around 13:55 GMT, coming at 9.6% YoY, compared to the previous reading of 7.6%, failed to underpin the US Dollar (USD). Later at 15:00 GMT, US Pending Home Sales for November and the Richmond Fed Indices are expected to improve slightly compared to its previous readings. Another factor that improved traders’ sentiment is that China is removing Covid-19 restrictions on visitors while beginning to issue travel permits to Hong kong residents. Additionally, authorities started to issue passports and would officially reopen its borders on January 8. Even though the mood shifted positively, fears that inflationary pressures would rise keep traders wary. In the meantime, the US Dollar Index (DXY), a gauge of the buck’s value against a basket of peers, losses 0.28%, down at 103.984, undermined by falling US Treasury bond yields. Ahead into the week, the UK economic docket is empty, while the US calendar will feature Initial Jobless Claims for the week ending on December 23, ahead of the release of the Chicago PMI on Friday. GBP/USD Price Analysis: Technical outlook From the daily chart perspective, the GBP/USD is testing the 20 and 200-day Exponential Moving Average (EMA) at 1.2113 after bouncing from weekly lows around 1.2000. If the former is cleared, the nest resistance would be an upslope trendline previous support-shifted- resistance around 1.2180, followed by the 1.2200 figure. On the flip side, failure to stay above 1.2100 could pave the way toward weekly lows at 1.2000 and the 50-day EMA at 1.1935.
USDX Will Try To Test And Break Below The 103.50 Level

Forex: Trading British pound to US dollar pair during American session

InstaForex Analysis InstaForex Analysis 29.12.2022 16:28
I focused on the 1.2050 level in my morning forecast and suggested making decisions about entering the market there. Let's analyze the 5-minute chart to determine what transpired there. A false breakdown that developed at 1.2050 grew and formed, producing a strong sell signal. The downward movement, as a result, was about 25 points, and the pressure on the pair is still present. Technically speaking, the second half of the day has not seen any changes.     You require the following to open long positions on the GBP/USD: Data on unemployment benefit applications in the US are released during the US session, which could cause a brief increase in market volatility - particularly if the data come in worse than expected, which would weaken the US dollar's position, but only temporarily. With favorable news, it is best to watch for a decline in the pair and a potential false breakdown in the 1.1994 support level, which corresponds to the December low. This will result in a buy signal and enable you to return above 1.2050 because it will show that there are significant buyers in the market. We can anticipate a sharper upward jerk and an update to the level of 1.2111, from where the pound was actively sold yesterday, if there is a breakthrough and consolidation above this range. The growth prospects at 1.2183, where I advise fixing profits, will be opened up by an exit above 1.2111 with a comparable test. The bulls' pressure on the pair will increase significantly if they are unable to complete the tasks assigned to them and miss 1.1994 in the afternoon. This will cause the demolition of the stop orders placed below by buyers. Because of this, I suggest that you hold off on making any purchases and instead open long positions on a decline and a false breakdown close to the minimum of 1.1949. I advise purchasing GBP/USD right away in anticipation of a recovery from 1.1904 to gain 30-35 points in a single day. For opening short positions on the GBP/USD, you will need: The bears clearly stated that they are nearby at 1.2050 and that they expect to continue guarding this area. While trading will take place below this range, the main objective is to keep the pair below 1.2050. However, sellers have a good chance of breaking through the December lows. In the present scenario, it would be best to hold off on making any new sales until a false breakdown forms in the region of 1.2050, which will be another strong sell signal in anticipation of a resumption of the bear market and a sustained decline to a minimum of 1.1994. Only a breakout and a reverse test of this range from the bottom up will provide an entry point to sell with a move to 1.1949 and the potential for updating 1.1904, where I advise fixing profits. Nothing terrible will occur, but the pressure on the pound will lessen due to the possibility of GBP/USD growth and the lack of bears at 1.2050. In this case, the only entry point into short positions to move down is a false breakout in the vicinity of 1.2111. If there is no activity there, I advise you to sell GBP/USD right away at the highest price of 1.2183, but only if you are counting on the pair to fall back by 30-35 points during the day.     There were more long positions and fewer short ones in the COT report (Commitment of Traders) for December 20. It was made clear after important central bank meetings that regulators would keep raising interest rates and tightening monetary policy, which by all logic should increase demand for national currencies, including the British pound. The report makes it clear exactly how things stand. However, traders are unlikely to continue buying the pound with the same zeal in January, given that GDP data for the UK's third quarter were revised in the direction of a larger decrease, and the start of the recession is not an expectation for next year, but rather a reality this year. According to the most recent COT report, long non-commercial positions increased by 3,276 to a level of 35,284 while short non-commercial positions decreased by 16,860 to a level of 40,887. As a result, the non-commercial net position's negative value decreased to -5,603 from -25,739 the previous week. In comparison with 1.2377, the weekly closing price dropped to 1.2177.     Signals from indicators Moveable Averages The fact that trading occurs around the 30 and 50-day moving averages suggests that the market is lateral. Notably, the author considers the period and prices of moving averages on the hourly chart H1 and departs from the standard definition of the traditional daily moving averages on the daily chart D1. Bands by Bollinger The indicator's lower limit, which is located around 1.010, will serve as support in the event of a decline. Description of indicators Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow. Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green. MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between the short and long positions of non-commercial traders. Relevance up to 13:00 2022-12-30 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331116
British pound against US dollar on January 2nd, Stefan Doll takes a technical look

British pound against US dollar on January 2nd, Stefan Doll takes a technical look

InstaForex Analysis InstaForex Analysis 02.01.2023 15:17
Trend analysis (Fig. 1) GBP/USD may start moving down on Monday, starting from the closing of Friday's daily candle at 1.2092 to the lower fractal at 1.2008 (daily candle from 12/30/2022). If this level is tested, the pair will resume rising towards the historical resistance level of 1.2213 (blue dotted line), then fall down again.     Fig. 1 (daily chart) Comprehensive analysis: Indicator analysis - downtrend Fibonacci levels - downtrend Volumes - uptrend Candlestick analysis - uptrend Trend analysis - uptrend Bollinger bands - uptrend Weekly chart - uptrend Conclusion: GBP/USD will fall from 1.2092 (closing of Friday's daily candle) to the lower fractal at 1.2008 (daily candle from 12/30/2022), rebound to the historical resistance level of 1.2213 (blue dotted line), then move down again. Alternatively, the pair could rise from 1.2092 (closing of Friday's daily candle) to the upper fractal at 1.2124 (daily candle from 12/28/2022), then bounce down to the support line at 1.2065 (thick white line). Upward movement may resume after testing the level. Relevance up to 07:00 2023-01-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331263
Forex: British pound against US dollar - technical analysis - January 2nd

Forex: British pound against US dollar - technical analysis - January 2nd

InstaForex Analysis InstaForex Analysis 02.01.2023 22:39
Overview : The GBP/USD pair broke resistance, which turned into strong support at 1.1991. Right now, the pair is trading above this level. It is likely to trade in a higher range as long as it remains above the support (1.1991), which is expected to act as a major support today. Therefore, there is a possibility that the GBP/USD pair will move upwards and the structure does not look corrective. The trend is still below the 100 EMA for that the bullish outlook remains the same as long as the 100 EMA is headed to the upside. From this point of view, the first resistance level is seen at 1.2077 followed by 1.2163, while daily support 1 is seen at 1.1991 (last bearish wave - 00% Fibonacci retracement). According to the previous events, the GBP/USD pair is still moving between the levels of 1.1991 and 1.2163; so we expect a range of 172 pips. Consequently, buy above the level of 1.1991 with the first target at 1.2077 so as to test the daily resistance 1 and further to 1.2100. Besides, the level of 1.2163 is a good place to take profit because it will form a double top. On the contrary, in case a reversal takes place and the GBP/USD pair breaks through the support level of 1.1991, a further decline to 1.1949 can occur, which would indicate a bearish market. Overall, we still prefer the bullish scenario, which suggests that the pair will stay above the zone of 1.1991 - 1.1949 in coming three days. In the same time frame, resistance is seen at the levels of 1.1991 - 1.1949. The stop loss should always be taken into account for that it will be reasonable to set your stop loss at the level of 1.1949 (below the support 2). Forecast: - The market opens above the daily pivot point. It continues to move downwards to hit the daily pivot point. Consequently, buy at the daily pivot point (1.2040). - Take profit: It should set take profit at R1 (1.2077), R2 (1.2100) and R3 (1.2163) .The previous range was large (185pips). - Stop loss: Stop loss should set depending on the money management. In this case, we prefer setting the stop loss depending this formula <=> Take profit = 3/2 x Stop loss. Thus, if a breakout happens at the support level of 1.1949, then this scenario may be invalidated. Relevance up to 21:00 2023-01-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/307071
Bank of England Faces Dilemma: Will They Raise Rates by 25bps or 50bps?

British pound against US dollar - technical analysis for January 3rd. What can we expect from GBP/USD?

InstaForex Analysis InstaForex Analysis 03.01.2023 21:07
Overview : The EUR/USD pair faced resistance at the level of 1.2077, while minor resistance is seen at 1.1991. Support is found at the levels of 1.1904 and 1.1841. Pivot point has already been set at the level of 1.2077. Equally important, the EUR/USD pair is still moving around the key level at 1.2077, which represents a daily pivot in the H1 time frame at the moment. Yesterday, the EUR/USD pair continued moving upwards from the level of 1.2077. The pair rose to the top around 1.2077 from the level of 1.1904 (coincides with the last bearish wave at the same time frame). Right now, the pair is trading above this level. It is likely to trade in a higher range as long as it remains above the support (1.1904), which is expected to act as a major support today. Therefore, there is a possibility that the EUR/USD pair will move upwards and the structure does not look corrective. Read next: Eurodollar: dominance of hawkishness in tomorrow's Fed minutes may support greenback| FXMAG.COM The trend is still below the 100 EMA for that the bullish outlook remains the same as long as the 100 EMA is headed to the upside. In consequence, the EUR/USD pair broke resistance, which turned into strong support at the level of 1.1904. The level of 0.6695 is expected to act as the major support today. We expect the EUR/USD pair to continue moving in the bullish trend towards the target level of 1.2163. On the downtrend: If the pair fails to pass through the level of 1.1904, the market will indicate a bearish opportunity below the level of 1.1904. So, the market will decline further to 1.1840 and 1.1904 to return to the daily support. Moreover, a breakout of that target will move the pair further downwards to 1.1840. On the other hand, if a breakout happens at the support level of 1.1803, then this scenario may be invalidated. Relevance up to 20:00 2023-01-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read more: https://www.instaforex.eu/forex_analysis/307232
Bank of England hikes rates and keeps options open for further increases

UK: Low prints on Friday could make British pound (GBP) decrease

Kenny Fisher Kenny Fisher 12.01.2023 16:05
The British pound is drifting for a third straight day. In the European session, GBP/USD is trading at 1.2161, down 0.09%. We could see stronger volatility from the pound before the weekend, with the release of the US inflation report and UK GDP on Friday, both of which are market movers. Will US inflation continue to drop? There is guarded optimism ahead of the US inflation report. Inflation is projected to drop in December, which would be music to the market’s ears. The forecast for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate, which is more important, is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. The inflation release should result in volatility from the US dollar. If inflation, particularly the core rate, falls as expected or more, the US dollar will likely lose ground, as speculation will increase that the Fed may have to pivot from its hawkish stance and ease up on the pace of rates. Conversely, if inflation does not fall as much as expected, it would vindicate the Fed’s hawkish position, which the markets may have to grudgingly accept. There remains a dissonance between the Fed and the markets, despite warnings by the Fed that the markets are underestimating Fed rate policy. The Fed has insisted that further rate hikes are coming, while there have been market players who are expecting a “one and done” hike in February which will wrap up the current rate cycle. The markets have priced in a peak terminal rate below 5% as well as rate cuts late in the year, while the Fed has been signalling a peak rate of 5-5.25% or even higher. Read next: According to Yomiuri newspaper, Bank of Japan will have a look into the side effects of loose monetary policy| FXMAG.COM In the UK, there are no major releases on Thursday, but Friday will be busy, highlighted by monthly GDP and Manufacturing Production. The markets are braced for soft numbers, which could send the pound lower. GDP for November is expected to contract by 0.2% m/m, following a gain of 0.5% in October. Manufacturing Production for November is forecast to come in at -4.8% y/y, after a -4.6% reading in October. GBP/USD Technical GBP/USD is putting pressure on 1.1832 and could test this line today. The next support level is 1.1726 There is resistance at 1.1913 and 1.2026 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD drifting, UK GDP next - MarketPulseMarketPulse
Issue on the US debt ceiling persists, Joe Biden goes back to the US

US stock markets appear much harder to convince despite the sharp falls in the S&P500 and Nasdaq 100 last week

Michael Hewson Michael Hewson 13.02.2023 09:42
Despite posting three successive days of record highs the FTSE100 closed the week lower, as did the rest of Europe's markets, as investors try to balance the risks from a slowing down in the pace of inflation, and central banks that, on the face it, want to continue to send a hawkish message on rate hikes. That message didn't appear to be cutting through until the January US non-farm payrolls report, as well as the services ISM, which painted a significantly better than expected look for the US economy. Bond markets are starting to reflect this changing perception, with yields rallying strongly with the US 2 year closing at its highest level since November last year, above 4.5%. US stock markets appear much harder to convince despite the sharp falls in the S&P500 and Nasdaq 100 last week, although the penny is showing early signs of dropping, with the Nasdaq 100 posting its first negative week this year. Some of last week's weakness may well also be down to caution ahead of tomorrow's US CPI report which may well be more resilient than expected. One of the main reasons we've seen a sharp fall in the US dollar since those 22-year peaks back in October has been an almost universal belief that US inflation has peaked. While that may well be true it certainly doesn't mean that inflation is likely to fall back equally as quickly as it has risen. That realisation along with last week's drip, drip narrative of hawkish Fed speakers which now finally appears to be cutting through, the most notable of which appears to be the comments from Fed vice-chair John Williams who said that rates might have to stay high for several years. These comments were particularly noteworthy given that they explicitly pushed back against the narrative of rate cuts by year end, which markets had started to assume would be coming fairly soon. Read next: UK Economy Suggest That Inflation Will Drop| FXMAG.COM It is true that in recent weeks, economic data has been much better than expected, not only in the US, but also in Europe as well, while on Friday the latest Canadian jobs report also painted a stronger than expected picture of the jobs market. With energy prices also close to multi-month lows the hope is that the worst may be over, although with the Chinese economy likely to be much stronger this year, that will inevitably mean that inflation is likely to be stickier. There is also little sign of a slowdown in services inflation and with all central banks having an inflation target of 2%, it is highly unlikely that central banks would contemplate cutting rates at a time when prices are well north of that figure. As we look ahead to another week, the main focus is going to be on tomorrow's US January CPI report, along with retail sales later in the week. Better than expected numbers are unlikely to be positive in the context of being near a peak for US rates. It's also a big week for UK economic data after last week's Q4 GDP numbers which showed the economy stalled. While there were some pockets of strength there is little doubt that the UK economy remains fragile and will continue to remain so as we look towards Wednesday's CPI and tomorrow's wages data. Headline inflation is still well above 10% and expected to remain so even after this week's CPI reading, which means consumers are likely to remain cash-strapped for some time to come, a trend that is likely to be reinforced by January retail sales numbers on Friday. EUR/USD – a move below the 50-day SMA opens the potential for a return to the lows this year at 1.0480. Resistance currently at 1.0780/90, with a move above 1.0800 stabilising and opening up 1.0920.   GBP/USD – sandwiched between resistance at the 50-day SMA, at 1.2190 and support at the 200-day SMA at 1.1970 Below 1.1960 retargets the 1.1835 area, while a move above 1.2200 argues for a move towards 1.2300. EUR/GBP – found support at the 0.8820 level last week. A move up through the 0.8880 retargets the 0.8930 area. Below 0.8820 targets a move towards 0.8780. USD/JPY – dipped to 129.80 last week before rebounding. The 50-day SMA now at 132.20 continues to cap the US dollar's advance. While below the 50-day SMA the bias is for a move back to the recent lows near 128.00.   FTSE100 is expected to open 6 points higher at 7,888 DAX is expected to open 15 points lower at 15,289 CAC40 is expected to open 6 points lower at 7,123
According to InstaForex analyst, demand for British pound may not increase soon

InstaForex's Miroslaw Bawulski talks positions on British pound against US dollar

InstaForex Analysis InstaForex Analysis 20.02.2023 16:11
In my morning forecast, I focused on the 1.2016 level and offered advice based on it for trading decisions. Let's analyze the 5-minute chart to see what happened. We didn't accomplish the targets I mentioned because of the minimal trading volatility, and no signals were created. Both the technical picture and the technique were left unchanged for the rest of the day.     You require the following to open long positions on the GBP/USD: Today is a holiday in the USA in observance of Presidents' Day, and several markets (including the stock market) are closed. Thus, no fundamental statistics are anticipated today. As a result, volatility and trading volume will stay exceedingly low, and I will not place a high value on the formation of entry points. As a result, purchasers of the pound have a good chance of continuing the upward correction after such a strong Friday rally. Under the circumstances, it would be preferable to wait for a decline and the emergence of a false breakout in the area of the nearest support at 1.2016, which is slightly below where the moving averages that are supporting the bulls are moving. This will serve as a signal to purchase the pound with the hope that it will strengthen to around 1.2070. I won't bet on the GBP/USD rate moving up to 1.2125 until it fixes and tests from top to bottom of this range. A pullback above this range will also bring growth prospects to 1.2178, where I've fixed profits. The bears will regain control of the market and put more pressure on GBP/USD if the bulls are unable to complete the duties assigned to them and miss 1.2016 in the afternoon. In this situation, I suggest against making hasty purchases and only starting long positions at the next support level of 1.1967 and only in the event of a false breakout. I'll buy GBP/USD right away only if it rises over the monthly low of 1.1919 with the intention of a correction of 30-35 points during the day. Read next: Despite the rise in interest rates, we’ve seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4| FXMAG.COM You require the following to open short positions on the GBP/USD: The pound is essentially being pushed into the area of the closest support on 1.2016 by sellers as they apply pressure over time. But, given that there won't be much trade today, it will probably be tough to break below 1.2016: at the very least, it will be impossible to tell whether there are any real players in the market or if everything is just speculation. As a result, maintaining the protection of the nearest resistance level of 1.2070 is still very important and would be a great indication to sell the pair at the moment. Growth and the formation of a false breakout there can trigger the opening of short positions and further decline of GBP/USD to the area of 1.2016, which must be brought back under control as soon as possible. A break and reverse test of this area will cancel out buyers' plans for an upward correction, reinforcing bears' position in the market and generating a sell signal with a fall below 1.1967. The 1.1919 area will be the farthest target, and an update there will signal the continuation of the downward trend. I will fix the profit there. Around 1.2070 in the afternoon, with the possibility of a GBP/USD rise and the lack of bears, bulls may continue to actively enter the market. I suggest that you take your time with sales and turn your attention to 1.2125. Only a false breakout creates an opening for short positions there. If there is no movement at this price, I will sell GBP/USD right away at the highest price of 1.2178, but only if I believe the pair will fall back by 30-35 points during the trading day.     The CFTC has been experiencing a technical issue that has prevented the publication of new COT reports for more than two weeks. The most recent data is for January 24. Both long and short positions were dramatically reduced in the COT report (Commitment of Traders) for January 24. But, given the difficulties the UK government is now facing, including dealing with strikes and demands for wage increases while also attempting to achieve a continuous fall in inflation, the recent reduction was within the acceptable threshold. Yet for the time being, all of this is receding into the background as we await the meetings of the Federal Reserve System, whose policy is anticipated to be less aggressive, and the Bank of England, whose pronouncements are certain to keep an aggressive tone by raising the rate by 0.5% once more. All of this will benefit the British pound, so unless something spectacular occurs, I'll rely on it strengthening even more. According to the most recent COT data, long non-commercial positions declined by 6,713 to 34,756 while short non-commercial positions decreased by 7,476 to 58,690, resulting in a fall in the non-commercial net position's negative value to -23,934 from -24,697 a week earlier. We will continue to keep a careful eye on the economic indicators for the UK and the decision made by the Bank of England because such insignificant changes do not significantly alter the balance of power. In contrast to 1.2290, the weekly ending price increased to 1.2350.     Signals from indicators Moving Averages Trade is taking place above the 30 and 50-day moving averages, indicating an effort to draw back purchasers of the pound into the market. Note that the author's consideration of the period and costs of moving averages on the hourly chart H1 differs from the standard definition of the traditional daily moving averages on the daily chart D1. Bands by Bollinger The indicator's upper limit, which is located at 1.2045, will serve as resistance in the event of growth. Description of indicators Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow. Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green. MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between the short and long positions of non-commercial traders. Relevance up to 11:00 2023-02-21 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335567
How investors can best position themselves amid unclear Federal Reserve rate outlook?

The US manufacturing and services PMIs are expected to reach 47.4 and 47.3 respectively

Michael Hewson Michael Hewson 21.02.2023 10:38
In the absence of US markets for President's Day yesterday European markets underwent a quiet and subdued session, with little in the way of direction. The FTSE100 managed to eke out a modest gain above 8,000 with resilience in the mining sector helping to buoy the London market. At the end of last year public sector borrowing in the UK surged to its highest December level since records began due to the cost of energy support as well as higher debt costs. The sum of £27.4bn was over double what it was in 2021. As we look towards today's January numbers, we can probably expect to see a modest improvement in tax receipts to help boost the tax take, as companies and individuals settle their final year tax bills, but not by enough to push the sum into surplus territory, with an expectation we will see an improvement to £7.9bn, but no surplus. Read next: Despite the rise in interest rates, we’ve seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4| FXMAG.COM On the plus side with energy prices continuing to fall sharply we have been seeing a pickup in economic activity in the past few months which is being reflected in the latest PMI numbers over the last 3 months. Today's flash PMIs from France, Germany and the UK are set to point to a further pickup in economic activity, with manufacturing expected to show an improvement to 51, 48.1 and 47.5 respectively. Services sector activity has seen a similar improvement albeit from slightly lower levels with French services activity expected to improve to 49.8, from 49.4, Germany to 51, from 50.7 and the UK to edge up to 49.2 from 48.7. We can also expect to see a continued improvement in German ZEW investor sentiment given the recent declines in energy prices and pickup in economic activity, and rise in the DAX, although the current situation index is still expected to remain firmly in negative territory at -50.5. Expectations are set to improve to 23 from 16.9. As far as US manufacturing and services PMIs are concerned there is a significant disconnect between these indicators and the ISM surveys which show a more positive picture of the US economy. Both US manufacturing and services sector activity are forecast to remain in contraction at 47.4 and 47.3 respectively albeit a modest improvement on the January numbers. . EUR/USD – quiet session yesterday, with support at the lows last week at 1.0610 area and resistance at the 50-day SMA currently at 1.0730. The bias remains for a move towards the 1.0480 level, while below the 1.0800 area. GBP/USD – found support at the 200-day SMA at the end of last week, keeping the current range between support at 1.1920/30 and resistance at the 50-day SMA at 1.2180 intact. Below 1.1920 retargets the 1.1835 area, while we need to see a move through 1.2300 to reopen a move towards 1.2400. EUR/GBP – has found support at the 0.8870 area after last week's failure at the 0.8930 area. Below 0.8860 reopens a move back towards support at the 50-day SMA at 0.8810 area. USD/JPY – drifted back from the 135.10 area after breaking above the 50-day SMA last week which is now at 132.00. This should now act as support for a move towards the 200-day SMA at 136.70.   FTSE100 is expected to open 10 points lower at 8,004 DAX is expected to open unchanged at 15,477 CAC40 is expected to open unchanged at 7,335
Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little

British pound against US dollar on February 21st - analysis and possible scenarios

InstaForex Analysis InstaForex Analysis 21.02.2023 13:39
Trend analysis (Fig. 1). The pound-dollar pair may move downward from the level of 1.2036 (closing of yesterday's daily candle) to test 1.1982, the 76.4% pullback level (blue dotted line). When testing this level, the price may move up.     Fig. 1 (daily chart). Comprehensive analysis: Indicator analysis - down; Volumes - down; Candlestick analysis - down; Trend analysis - down; Bollinger bands - bottom; Weekly chart - down. General conclusion: Today, the price may move downward from the level of 1.2036 (closing of yesterday's daily candle) to test 1.1982, the 76.4% pullback level (blue dotted line). When testing this level, the price may move up. Read next: The Pound Gained After The Publication Of PMI Reports, Euro Is Below 1.07, USD/JPY Pair Is Above 134.50| FXMAG.COM Alternatively, the price may move downward from the level of 1.2036 (closing of yesterday's daily candle) to test the 1.1941 support level (thick blue line). When testing this level, the price may move up. Relevance up to 07:00 2023-02-22 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335641
UK Gfk Consumer Confidence index got better fourth month in a row

InstaForex's Miroslaw Bawulski talks positions on British pound against US dollar on February 21st

InstaForex Analysis InstaForex Analysis 21.02.2023 14:06
Yesterday, no signs were created to enter the market. I advise you to examine the 5-minute chart and determine what happened. In my morning forecast, I focused on the 1.2016 level and offered advice based on it for trading decisions. A decline in the area of 1.2016 did occur, but only a few points were sufficient to prevent the creation of a false breakout at this level. Due to the weekend in the United States, trading volatility was at a relatively low level, making it impossible to wait for new entry points in the afternoon.     To open long positions on GBP/USD, you will need the following: The composite index of the UK PMI for February of this year, the indicator of business activity in the manufacturing sector, and other pretty significant data are being released today. These numbers have the potential to have a significant impact on the direction of the pound. Positive data suggest that the upward correction seen last Friday might continue. The Confederation of British Industrialists predicts that the balance of industrial orders won't have a significant effect on the market. In the case of weak statistics, it would be advisable to wait for a decline and the development of a false breakout in the area of the nearest support of 1.2016, just below which the moving averages on the bulls pass. I'll be watching the buyers' activity there for a signal to buy the pound in anticipation of a rise to the 1.2070 level. I will only wager on the continuance of the movement of the GBP/USD up to the maximum of 1.2125 when fixing and testing from top to bottom of this range. A pullback above this level will also bring growth prospects to 1.2178, where I've fixed profits. The bears will retake control of the market and put more pressure on the GBP/USD if the bulls are unable to complete the tasks assigned and hit 1.2016. In this situation, I suggest against making hasty purchases and only starting long positions at the next support level of 1.1967 and only in the event of a false breakout. I'll buy GBP/USD right away only if it rises over the monthly low of 1.1919 with the intention of a correction of 30-35 points during the day. For opening short positions on the GBP/USD, you will need: There was no explanation for the bears' lack of activity yesterday. It is a top priority to protect the nearest resistance level of 1.2070, which in the present condition would be a great indication to sell the pair. The rise and development of a false breakout there following positive PMI indicators can result in the initiation of short positions and additional movement of the GBP/USD down to the area of 1.2016, which must simply be brought under control as soon as possible. A break and reverse test of this level will cancel out buyers' plans for an upward correction, reinforcing bears' position in the market and generating a sell signal with a fall below 1.1967. The 1.1919 area will be the farthest target, and an update there will signal the continuation of the downward trend. I'll set the profit there. Bulls may continue to actively enter the market given the possibility of a GBP/USD rise and the lack of bears at 1.2070. In this scenario, the bears will pull back, and an entry point for short positions will only be formed by a false breakout at the next resistance level of 1.2125. If there is no activity there, I will sell GBP/USD right away at the highest price of 1.2178, but only if I believe the pair will fall back by 30-35 points over the day.     Due to a CFTC technical fault that has been ongoing for more than two weeks. The most recent COT reports have not yet been released. Following the data for January 24. Both long and short positions were dramatically reduced in the COT report (Commitment of Traders) for January 24. But, given the difficulties the UK government is now facing, including dealing with strikes and demands for wage increases while also attempting to achieve a continuous fall in inflation, the recent reduction was within the acceptable threshold. According to the most recent COT data, long non-commercial positions declined by 6,713 to 34,756, while short non-commercial positions decreased by 7,476 to 58,690, resulting in a fall in the non-commercial net position's negative value to -23,934 from -24,697 a week earlier. We will continue to keep a careful eye on the economic indicators for the UK and the decision made by the Bank of England because such insignificant changes do not dramatically alter the balance of power. In contrast to 1.2290, the weekly ending price increased to 1.2350. Read next: The Pound Gained After The Publication Of PMI Reports, Euro Is Below 1.07, USD/JPY Pair Is Above 134.50| FXMAG.COM     Signals from indicators Moving Averages Trade occurs in the area of the 30 and 50-day moving averages, a sign of market ambiguity over future direction. Notably, the author considers the time and prices of moving averages on the hourly chart H1 and departs from the standard definition of the traditional daily moving averages on the daily chart D1. Bands by Bollinger In the event of the growth, the indicator's upper limit near 1.2035 will act as resistance. The indicator's lower limit, which is located at 1.2015, will act as support in the event of a downturn. Description of indicators Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow. Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green. MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between the short and long positions of non-commercial traders. Relevance up to 07:00 2023-02-22 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335647
The UK's economic output remains 0.6% below its late 2019 level, making it the only G7 nation yet to recover from the pandemic

UK services PMI that reached 53.3 and stronger Manufacturing Business Activity Index have supported British pound against US dollar

Alex Kuptsikevich Alex Kuptsikevich 21.02.2023 15:34
Preliminary UK business activity figures for February surprised on the upside, sending the Pound into a mini rally of 1% within half an hour of publication and supporting prices later in the day. The Manufacturing Business Activity Index climbed from 47.0 to 49.2, with the current reading suggesting a slight contraction in activity and marking the third month of recovery. The services PMI jumped from 48.7 to 53.3, moving into growth territory, against expectations for a slight increase to 49.2. The latest reading is the highest since last June and has the potential to trigger a notable revision in expectations for the economy and interest rates. Strong data releases have supported the GBPUSD at a very important time. Late last week, the pair tested support at its 200-day moving average. Buyers actively came to the rescue as the pair fell to the 1.1900 level, and today they are already testing the strength of the 1.2100 level. Read next: Oanda's Craig Erlam talks RBNZ decision: In this case, the tight labour market threatens to make inflation much more stubborn| FXMAG.COM On the technical side, a more important short-term level looks to be 1.21500, where the 50 SMA and the area of recent local highs are concentrated and from where the pair was actively sold off precisely a week ago and a correction of 76.4% from the rise from the September lows to the December highs. For the pair to move higher, it will need increased risk appetite in global markets. And that may be a problem, as US index futures have come under pressure, and the FTSE100 is retreating from its historic highs, back below 8000.
US core inflation hits 5.5% and it's the second lowest reading since November 2021

Judging from Michael Hewson's (CMC Markets) words, today weekly jobless claims are likely to reinforce the tightness of the US jobs market

Michael Hewson Michael Hewson 23.02.2023 12:44
European markets finished the day lower yesterday, despite a softening in yields which was brought about by comments from St. Louis Fed President James Bullard that he envisaged a Fed funds rate of 5.37%. This is broadly in line with the Minneapolis Fed's Neel Kashkari who has consistently indicated a more hawkish stance of 5.4%, although this a slightly more benign stance than markets had started to price in over the past few days. Notwithstanding that, last night's Fed minutes didn't tell the markets much that hadn't been deduced already given the recent comments from Mester and Bullard last week. What they did show however was that there was significant sympathy for a 50bps rate hike from a few FOMC members before they settled on the more gradual option of a 25bps rate rise. Fed officials were also at pains to cite continued inflation risk, which suggests contrary to the narrative that followed the Powell press conference that the Fed is far from done when it comes to raising rates further. A lot of the takeaway from the minutes last night was that they didn't provide a lot of new information. That isn't entirely true, given that we now know that a number of other Fed officials share the view of Bullard and Mester that more needs to be done, and in light of the data since then that position will only have hardened further. Without last week's interventions these minutes would have been considered extremely hawkish, and with the interventions they now show that the Federal Reserve has further to go, with another 25bps in March, followed by further hikes into Q2. Despite the rise in interest rates, we've seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4, after a weak H1. US markets finished the day lower albeit off the lows of the day with the S&P500 posting its 4th successive day of losses, although the Nasdaq managed to close higher. This divergence looks set to help markets in Europe open marginally higher, although the FTSE100 looks set to underperform due to a host of big companies going ex-div, including GSK, AstraZeneca, Unilever and Barclays. Today's weekly jobless claims are likely to reinforce the tightness of the US labour market and are expected to rise to 200k from 194k. Despite the rise in interest rates, we've seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4, after a weak H1. The first iteration of US Q4 GDP saw the economy expand by 2.9%, which was above expectations of 2.5%. Read next: The Real Estate Market In China Has A Chance To Revive, Indonesia Economy Is More Resilient| FXMAG.COM Personal consumption was a little disappointing, slipping back to 2.1%, which wasn't that surprising given that November and December retail sales contracted. This trend will probably rebound in the January personal spending and income numbers which are due tomorrow. Before this afternoon's claims data and US Q4 GDP we get the final iteration of EU CPI for January which is expected to be confirmed at a slightly higher 8.6%, due to hotter than expected Germany CPI numbers, while core prices are expected to remain steady at a record high of 5.2%. This guarantees another 50bps rate hike from the ECB when it meets next in March, a move which was reiterated earlier this week by ECB President Christine Lagarde..  EUR/USD - slipped below the 1.0610 level keeping the prospect of a move towards the 1.0480 level.  We have resistance at the 50-day SMA currently at 1.0730. GBP/USD – still ranging between support at the 200-day SMA at 1.1935, and resistance at the 50-day SMA at 1.2180. We need to see a move through 1.2200 to target a move back towards 1.2300. EUR/GBP – rallied from the 0.8780 area and currently finding resistance at the 50-day SMA at 0.8820 area. Further resistance comes in at the 0.8870 area. USD/JPY – slipped back from 2-month highs at 135.25 area, as it looks to edge towards the 200-day SMA at 136.70. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 10 points lower at 7,920 DAX is expected to open 60 points higher at 15,460 CAC40 is expected to open 21 points higher at 7,320
US Inflation Eases, but Fed's Influence Remains Crucial

S&P 500 declined to a one month low yesterday. Fed to consider December dots as arguments for future rate hike expectations?

Michael Hewson Michael Hewson 22.02.2023 09:59
European markets slipped back yesterday with the FTSE100 slipping below the 8,000 level and posting its biggest decline in two weeks, despite better-than-expected flash PMI numbers, for February. While a positive development, this served to help push yields higher in anticipation that central banks might have to be slightly more hawkish when it comes to raising rates in the coming weeks and looks set to weigh on markets further later this morning. This has certainly been borne out in Asia trading after the RBNZ hiked rates by 50bps with the prospect of more to come. These moves by central banks can across as counterintuitive given that the reason for the improvement in economic activity was due to sharp declines in energy prices which is also exerting downward pressure on inflation, however core inflation isn't coming down yet. Today's final Germany CPI numbers for January look set to reinforce that with a decline to 9.2% from 9.6% in December, however due to the lag effect, core prices are still rising which means higher rates for longer. The latest IFO business survey for February is also expected to show a continued improvement from January's numbers, with the business climate expected to rise to 91.2, from 90.2, and expectations to rise to 88.2 from 86.4. US markets also fell sharply yesterday with the S&P500 falling to a one month low, and its worst one day decline this year, as equity markets start to move into line with recent bond market moves. "what we've got here is a failure to communicate" In the immediate aftermath of the recent 25bps Fed rate hike, there appeared to be a type of cognitive dissonance when it came to what the market wanted to hear from the Federal Reserve, and what the US central bank was trying to say. To borrow a line from the film Cool Hand Luke, "what we've got here is a failure to communicate". Long story short, the market thought that the inflation job was done, or at least close to it, even though the recent non-farm payrolls report, and ISM services report muddied the waters in that regard. For all of Fed chair Jay Powell's insistence that more rate hikes were coming at his post meeting press conference, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy was likely to evolve. Since that meeting, things have moved on somewhat with a succession of Fed officials pushing back on the dovish narrative, insisting that rates are likely to stay higher for longer, and which has seen yields push strongly higher in the almost 3 weeks since then. Read next: Food companies under pressure to source deforestation-free products under new EU law| FXMAG.COM It is also important to remember the release of the latest minutes needs to be set in the context of the fact that the meeting came before the recent jobs, ISM, and retail sales data. That said, the recent intervention by non-voting member, Cleveland Fed President Loretta Mester last week, that she saw a compelling case for a 50bps move at the last meeting was an unexpected intervention to the cosy consensus that had developed around the 25bps narrative. This was compounded by another non-voting member, James Bullard of the St. Louis Fed who suggested 50bps in March could be a consideration. This raises two questions, one is to how many other Fed members saw a compelling case for a 50bps move at the last meeting, and two, how much could that have shifted over the last few weeks in light of the recent strength of US data. The minutes should answer the first question, the second question will need to see more data, but given recent evidence, anything that could be considered hawkish from the release of today's minutes will be magnified even more given the strength of recent data.  It's also probably safe to assume that most Fed officials will probably still see the December dots as an accurate representation of future rate hike expectations.  EUR/USD remains under pressure while below resistance at the 50-day SMA currently at 1.0730. The bias remains for a move towards the 1.0480 level, while below the 1.0800 area. GBP/USD – having failed to fall below the 200-day SMA we've seen a squeeze back towards the 50-day SMA at 1.2180. We need to see a move through 1.2200 to target a move back towards 1.2300. EUR/GBP – slid below the 0.8860/70 area yesterday dropping below the 50-day SMA at 0.8810 area, and slipping towards the 0.8760 area, where we have the next support. Resistance comes in at the 0.8870 area. USD/JPY – continues to make gains pushing up to a new 2-month high at 135.25 area, as it looks to edge towards the 200-day SMA at 136.70. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 20 points lower at 7,957 DAX is expected to open 27 points lower at 15,370 CAC40 is expected to open 20 points lower at 7,288
Bank of England raised the interest rate for the 12th meeting in a row

British pound against US dollar - InstaForex's Peter Jacimovic sees potential for the downside continuation

Peter Jacimovic Peter Jacimovic 23.02.2023 16:11
Technical analysis: GBP/USD has been trading downside this morning and I see potential for the downside continuation of the downside trend in the background. Due to the rejection of the Fibonacci Retracement 38.2% and the downside cross, I see potential for the further drop towards lower references. Downside structural objectives are set at 1.2000, 1.1970 and extreme objective at 1.1910 Stochastic and MACD oscillators are showing bear cross, which is good sign for the further downside movement. Key intraday resistance is set at 1.2070 Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM Relevance up to 10:00 2023-02-24 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/313809
Federal Reserve splits highlighted by May FOMC minutes

USA: Fed may stop at the interest rate of 5.4%. Today PCE core deflator is expected to reach 4.3%

Michael Hewson Michael Hewson 24.02.2023 11:39
One year on from the Russian invasion of Ukraine and it seems remarkable that European markets have recovered all their losses and are slightly higher, while US markets are broadly lower, although not by much. It's even more remarkable given how much higher interest rates are now than they were a year ago. While the cost of living has soared its also important to note the billions of US dollars, euros and sterling that have been spent to support respective economies which have gone a long way to cushion the blow, along with the fact that demand in China has been constrained by covid restrictions taking some of the pressure off energy demand. It's been a difficult week for European and US stock markets with the prevailing theme being one of weakness, although as far as markets in Europe are concerned, they are a little overdue a pullback after such a strong start to the year. Yesterday saw markets in Europe, as well as the US finish the day higher after the Fed minutes gave a broad indication that any Fed pause would likely occur at around 5.4%, tempering the recent rise in bond yields. The rally in US markets yesterday looks set to see European markets open higher this morning. There does however appear to be some complacency about how long rates are likely to stay at these sorts of pre-financial crisis levels. This now looks set to be the next shoe to drop, especially given the strength of the labour markets on both sides of the Atlantic. It seems highly improbable that inflation will fall back quickly unless the unemployment rate starts to rise, and demand slows and that doesn't seem to be happening yet. We are hearing about job losses throughout this earnings season, but they have been very piecemeal in nature, and the number of jobs being shed isn't that high, especially given the number of vacancies that are still open. Yesterday's US Q4 GDP revisions pointed to a fall in personal consumption, which fell to 1.4% from 2.1%. This shouldn't have come as too unexpected given the weak retail sales numbers seen at the end of last year. What was more concerning was that core PCE on a quarterly basis saw prices rise to 4.3% from 3.9%. Read next: Visa Success At The Expense Of Small Businesses| FXMAG.COM With retail sales surging by 3% in January that would suggest that today's personal spending numbers are likely to be similarly strong, after the -0.2% decline seen in December. Expectations are for a rebound of 1.4%, while personal income is also expected to rise by 1%. Investors will also be paying close attention to the January core PCE deflator numbers, which is the Fed's preferred inflation measure, and which has fallen back sharply in the last few months from 5.2% in September, falling to its lowest level since October 2021 in December at 4.4%. The sharp fall from those peaks certainly helped drive the disinflation narrative that got the markets speculating that we might start to see some of the recent rate hikes start to get reversed before the end of this year before the January payrolls report blew that bit of wishful thinking out of the water. Given the strength of recent economic data, today's January numbers may call time on the trend of lower prices, with expectations that the PCE core deflator could fall only modestly from 4.4% to 4.3%. What the markets won't want to see is prices start to edge up again given how fragile US stock markets are currently looking, despite yesterday's rebound by the S&P500.  EUR/USD – continues to slip lower keeping the path towards 1.0480 very much on the table. We have resistance at the 50-day SMA currently at 1.0730. GBP/USD – continues to range between resistance at the 50-day SMA at 1.2180, and the support at the 200-day SMA at 1.1935. Below 1.1935 targets the 1.1830 area. EUR/GBP – rallied from the 0.8780 area and currently finding resistance at the 50-day SMA at 0.8830 area. Further resistance comes in at the 0.8870 area. USD/JPY – continues to edge higher but is encountering resistance at 2-month highs at 135.35 area, as it looks to edge towards the 200-day SMA at 136.70. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 33 points higher at 7,940 DAX is expected to open 62 points higher at 15,537 CAC40 is expected to open 38 points higher at 7,355
Issue on the US debt ceiling persists, Joe Biden goes back to the US

Jason Sen talks Forex pairs - USD/JPY, eurodollar, greenback against Canadian dollar and more

Jason Sen Jason Sen 24.02.2023 09:57
AUDUSD lower as expected this week to hit very strong support at 6800/80. A low for the day exactly here again yesterday. Longs need stops below 6760. A break lower is a sell signal of course, targeting 6725/20 today. Our longs now target first resistance at 6850/60 for profit taking - shorts here need stops above 6880. Target is obviously 6800 for profit taking. USDJPY longs at buying opportunity at 134.10/133.90 worked perfectly as we edge slowly in the right direction to reach 135.36 but not enough to hit my target of 135.45/55. The pair reversed to retest my buying opportunity at 134.10/133.90. A low for the day exactly here. Longs need stops below 133.60. Much better support at 133.10/132.90. Longs need stops below 132.70. Our new longs at 134.10/133.90 have already reached 134.60. |Above 134.80 can retest 135.20/30. On a break above 135.40 look for 135.80/90. Read next: Undoubtedly, the Shanghai upgrade will significantly impact ETH's price and volatility | FXMAG.COM EURJPY broke first support at 143.10/142.90 for a sell signal & we did bounce to 142.91 before hitting the downside target of 142.40, but not quite as far as 142.00/141.90 for profit taking on shorts. A low for the day 14 pips above here as I write. EURUSD broke support at 1.0690/70 as expected for sell signal targeting 1.0600 with a low for the day exactly at minor support at 1.0590/1.0570. So a break below 1.0560 is the next sell signal targeting 1.0510/00. I would not be surprised to see a bounce from 1.0590/1.0570 to minor resistance at 1.0640/50. Shorts need stops above 1.0660. A break higher can target 1.0680/90 today. USDCAD tests 4 month trend line resistance at 1.3570/90 with a high for the day exactly here. Shorts need stops above 1.3610. A break higher is a buy signal targeting 1.3700. Shorts at 4 month trend line resistance at 1.3570/90 can target 1.3535 (hit yesterday) & 1.3490/80 for profit taking. Dollar Index breaking above a 3 month bear trend line with completion of a bull flag - so I think we have another buy signal for the dollar as longs as we hold the trend lines at 103.60/40. Immediately targets for the dollar index are 105.15 & 105.80. EURCAD I am going to wait to see if a head & shoulders forms. A high for the day exactly at the 50 day moving average at 1.4440/50 helps this pattern to develop as I stated yesterday, therefore so far this pattern is starting to play out. A break below support at 1.4230/20 will be the sell signal targeting 1.4150 & 1.3980. CADJPY now has a small double top as we trade sideways for a week. We made a low for the day exactly at support at 9830/20. The break below 9920 did not hold yesterday, but if we do make the break today we can target a buying opportunity at 9840/20. Longs need stops below 9800. GBPUSD made a high for the week at strong resistance at 1.2130/50. Our shorts here worked perfectly as we hit 1.2030/20 for profit taking. Strong support again at 1.1960/40.
Issue on the US debt ceiling persists, Joe Biden goes back to the US

Stock market has been calm thanks to a belief that peak rates are near. The US jobless claims are forecast to hit 196K

Michael Hewson Michael Hewson 02.03.2023 08:39
European markets got off to a broadly negative start to the month yesterday, except for the FTSE100, which managed to finish the session higher, due to a decent performance from the basic resource sector on optimism over the China reopening story. US markets similarly got off to a poor start, with a further acceleration in yields helping to push US stocks close to key support levels. The catalyst for yesterday's rise in yields was two-fold, an unexpected rise in German CPI to 9.3%, while ISM manufacturing prices paid unexpectedly jumped more than expected in February, thus reinforcing the higher rates for longer narrative that is starting to make investors increasingly nervous. One of the main reasons for recent stock market resilience has been a belief that we are close to peak rates, and that soon after we could start to see an easing. The latter part of that is becoming increasingly less likely with both the S&P500 and Nasdaq 100 testing but holding above their respective 200-day SMA's. This continued upward pressure on yields, along with continued pressure on these key support levels looks set to see European markets open slightly lower this morning. With US 2-year yields and German 2-year yields hitting their highest levels since the financial crisis, at 4.9% and 3.2% respectively, the euro and US dollar made solid gains yesterday, while the pound sunk like a stone, after Bank of England governor Andrew Bailey inexplicably suggested that the markets shouldn't take for granted that rates in the UK would rise much further. With so much of UK inflation being of the imported type this seemed a rather odd thing to say, especially for a central bank whose inflation fighting credibility is increasingly being questioned, and where headline CPI is still head and shoulders above that of its European counterparts, and still over 10%.       Later this morning we get the February flash EU CPI numbers, and here we could see an upside surprise. Much was made of the fact that EU headline inflation saw a sharp drop from 9.2% in December to 8.6% in January, with many taking the view that we could well continue to see sharp declines in the headline numbers over the course of the coming months. While an encouraging development, along with the sharp declines also being seen in headline PPI, any hopes of that continuing appear to have receded after this week's flash CPI numbers from France, Spain and Germany, for February all of which saw surprise increases in the headline rate of inflation, driven by sharp increases in food prices. Read next: Rivian Automotive estimates production of 50,000 vehicles in FY23 | FXMAG.COM The recent declines in headline inflation also aren't being reflected in core prices, and as far as wages are concerned these are still rising. When the January CPI numbers were released, core CPI went up to a record high of 5.3%, and if this week's resilience in headline inflation is any guide, is likely to remain high for some time to come. This is already prompting calls for more aggressive tightening after the expected 50bps rate hike which is due later this month with markets already pricing in a higher terminal rate of 4%. Today's flash EU CPI numbers for February are likely to be used as further evidence of the need for the ECB to be more aggressive when it comes to its guidance later this month. Expectations are for headline inflation to fall further to 8.3%, however this feels wrong given the evidence we've seen already this week, where all three of France, Spain and Germany saw headline CPI rise from its January levels.  If anything, we'll be lucky to see a fall, and could even see a modest increase from 8.6%, while core prices could push even higher from their current 5.3%. US weekly jobless claims are expected to come in at 196k, a slight increase from the previous week's 192k. EUR/USD – seen further gains yesterday after the Monday bullish day reversal off support at the 1.0530 area. We need to push through the 50-day SMA at 1.0730 to open up 1.0820. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85. GBP/USD – support remains at the lows this week at the 200-day SMA at 1.1920/30. A break of 1.1900 retargets the 1.1830 area. The 50-day SMA at 1.2150 remains key resistance, and which needs to break to retarget the 1.2300 area. EUR/GBP – rebounded off the 100-day SMA at 0.8750 and has tested trend line resistance at 0.8900 from the January peaks. Above 0.8900 targets 0.8980. USD/JPY – ran into resistance at the 200-day SMA at 136.90/00 earlier this week, slipping back to the 135.20 area. We also have interim support at 133.60. A break above 137.00 could see a move to 138.20.   FTSE100 is expected to open 10 points lower at 7,905 DAX is expected to open 28 points lower at 15,282 CAC40 is expected to open 9 points lower at 7,225
Tokyo Inflation Slows: Impact on JPY and USD/JPY

Stock markets to face today's ISM services report for February

Michael Hewson Michael Hewson 03.03.2023 13:08
After starting the day lower yesterday, European markets gradually clawed their way back to finish in positive territory, even as EU core CPI inflation surged to a new record high, driving yields higher across the board. These inflationary concerns initially weighed on US equity markets after they opened, but the failure to push below technical support at the 200-day SMA on both the Nasdaq 100 and S&P500 prompted a rebound which resulted in a positive close, after comments from Atlanta Fed President Raphael Bostic that indicated he would be in favour of a rate pause by the summer. This looks set to translate into a positive European open. Yesterday's rebound in equity markets came about despite a further increase in US yields with the US 10-year yield finishing well north of 4%, at 4.06%, while the 2-year yield closed at 4.89%. With US yields continuing to push higher, markets are increasingly pricing a higher Fed terminal rate. Since the start of February, this rate has risen sharply from 4.9% to be currently sitting at 5.5%, yet despite this equity markets have continued to hold up well. Much of this resilience may have something to do with how the US economy is faring, with the labour market continuing to maintain its recent resilience, as weekly jobless claims once again came in lower yesterday at 190k. Today equity markets will face yet another crucial test with the release of the latest ISM services report for February, which could act as a decent leading indicator for next week's delayed US employment report.   Read next: NAGA analyst on Eurozone inflation: This is likely to trigger a more restrictive monetary policy from the ECB for two reasons | FXMAG.COM While a lot of the attention in January was around that non-farm payrolls report, the January services ISM report was almost overlooked, but it could be argued that it was just as important in shaping the narrative of a resilient US economy. The ISM services index jumped from 49.6 in December to 55.2, while new orders also surged, to 60.4 from 45.2, their highest level since August. Prices paid remained steady at 67.8, as was employment at 50.0. The resilience of these numbers, along with bumper retail sales, showed the US economy surged in January, and with this jump in manufacturing prices paid earlier this week, there is increasing evidence that the recent declines in inflation might well have bottomed out.   The question now with today's ISM report was this services resilience sustained in February. A slowdown to 54.2 from 55.2 is expected, with the employment component expected to remain steady at 50. Before that we have the latest services PMI reports for Spain, Italy, France, Germany, and the UK, all of which are expected to show modest improvements on their January numbers as lower energy prices feed into improvements in sentiment across Europe. Spain is expected to improve to 53.7, Italy 52.3, France 52.8, Germany 51.3, and the UK to 53.3 from 48.7, belying the expectation that the UK economy has slipped into a Q1 slowdown. Yesterday Bank of England chief economist Huw Pill said that inflation risks in the UK economy continue to remain tilted to the upside, and supported the idea that rates are likely to have to continue to rise. His tone was in contrast to Governor Andrew Bailey the day before who would have markets believe that the probability of another rate hike in a couple of weeks' time should not be taken for granted.   EUR/USD – slipped back from just below the 1.0700 area yesterday but remains above the Monday bullish day reversal off support at the 1.0530 area. We need to push through the 50-day SMA at 1.0730 to open up 1.0820. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85. GBP/USD – once again retested support at the lows this week at the 200-day SMA at 1.1920/30. A break of 1.1900 retargets the 1.1830 area. The 50-day SMA at 1.2150 remains key resistance, and which needs to break to retarget the 1.2300 area. EUR/GBP – failed again to move through trend line resistance at 0.8900 from the January peaks. Above 0.8900 targets the 0.8980 area. Support comes in at the 0.8830 area. USD/JPY – continues to try and push through the 200-day SMA at 136.90/00 but has thus far failed to do so. Support comes in at the 135.20 area. We also have interim support at 133.60. A break above 137.00 could see a move to 138.20.   FTSE100 is expected to open 24 points higher at 7,968 DAX is expected to open 50 points higher at 15,377 CAC40 is expected to open 20 points higher at 7,304
How to turn volatility into opportunity? Stephen Dover from Franklin Templeton offers some judicious perspective

ADP payrolls report hit 242K. Japan: YCC may remain unchanged

Michael Hewson Michael Hewson 09.03.2023 09:41
European markets finished the day slightly higher yesterday after Federal Reserve chairman Jerome Powell clarified his comments from the previous day with respect to what the Fed is likely to do on rates in two weeks' time. In a manner of a parent soothing an errant child who is throwing a bit of a tantrum Powell merely restated that the Federal Reserve remains data-dependent and that nothing has been decided when it comes to whether we get 25bps or 50bps. The comments helped briefly pull yields lower and pull the US dollar off its highs for the day, but the reality remains that markets are slowly starting to come to the realisation that rates are likely to remain higher for longer and that the terminal rate is also likely to settle at a much higher level. Despite this US markets although closing lower on the day have managed to hold up reasonably well, and more importantly in the case of the S&P500 and Nasdaq 100 are still above key technical supports at the 200-day SMA. Even more strange is how well the Nasdaq 100 is holding up relative to the rest of the US market, despite the rise in yields we've seen since the January payroll numbers. The US 2-year yield has risen over 100bps since the Fed last met, pushing well above 5%, while US 6-month T-bills are also yielding well above 5% as well. This puts tomorrow's February payrolls front and centre when it comes to where US equity markets could head next. Yesterday's ADP payrolls report for February came in better than expected at 242k, while wage growth came in at 7.2%, still well above core inflation, while we only saw a modest decline in January JOLTS vacancies to 10.84m, reinforcing the tight nature of the labour market. These numbers don't scream an economy that is likely to see a quick easing of inflationary pressures, a factor that markets don't appear to be currently pricing in. Its hard to see how the Fed can even contemplate getting close to its inflation target of 2% much before 2025 given the challenges facing the global economy. As we look ahead to the next couple of days there are two events that could have a big say on how much volatility we see over the next few sessions.   The first one is the Bank of Japan rate decision, a meeting which will be the swansong for Haruhiko Kuroda as the mouthpiece of Japanese monetary policy, to be replaced by Kazuo Ueda as the new Bank of Japan governor. Read next: While Elon Musk wields significant influence over his followers, it is unlikely that he can single-handedly impose a dominant narrative on a particular market | FXMAG.COM A lot of the commentary around Ueda has seen him paint a fairly neutral stance when it comes to the prospect of possible policy tweaks. This would suggest that the current policy of yield curve control (YCC) is unlikely to see any changes in the short term. That said, given that this will be Kuroda's last meeting as central bank Governor there is the possibility he might start to lay the groundwork for a policy change in the coming months. Japanese inflation is already well above target at 4.3% and looks set to continue rising. It's hard to envisage a scenario that would see the Bank of Japan happy with an inflation rate that is rising sharply, and a currency that is once again wilting against the onslaught of a strong US dollar. The main focus for Friday will be the February payrolls report after the January numbers shook the markets out of the complacency that had characterised sentiment as we started 2023 on a strong note. As noted earlier the market reaction has been most notable in terms of bond yields, and while equity markets have continued to hold onto a narrative that further rate hikes are likely to be limited, the strength of the economic data since then has shifted that perception quite markedly in recent weeks. In the space of a month, we've gone from a narrative that had rate cuts coming before the end of the year, to an imminent pause in the next couple of months, to how many more rate hikes can we now expect? Tomorrow's payrolls report could well go further in reinforcing the latter if the jobs growth we saw in January isn't revised significantly lower and February also sees a strong print. Just to be clear, no one is expecting another 517k, and we could also see a significant revision, but a February number anywhere in the region of 220k would still be in line with a robust US labour market, especially with unemployment at 3.4% and the lowest level since 1969. Furthermore, the rising participation rate that we saw in January suggests we are seeing people returning to the workforce, The rise to 62.4% matched its highest level since the start of the pandemic. EUR/USD – has retested the previous lows at 1.0520/30 with the prospect we could see a retest of the 1.0480 area. The 1.0730 area remains a key resistance. GBP/USD – falling below the 200-day SMA has seen the pound fall to the 1.1800 area, opening up the prospect that we could slide towards 1.1640 on a break below the 1.1800 area. Resistance back at the 1.1980 area. EUR/GBP – broken through the trend line resistance at 0.8900 from the January peaks and could see a move towards the 0.8980 area. We need to push below support at the 0.8820/30 area to retarget the 0.8780 area. USD/JPY – continues to push up and over the 200-day SMA, with a concerted break through the 137.30 opening up the 138.20 area, and on to 139.50. Support comes in at the 135.20 area. We also have interim support at 133.60.   FTSE100 is expected to open 15 points lower at 7,915 DAX is expected to open unchanged at 15,632 CAC40 is expected to open 4 points lower at 7,320
Brazilian President suggesting replacing US dollar with own currencies of developing countries

British pound against US dollar has been influenced by the UK GDP print. Price action can change if NFP print beats expectations

Michalis Efthymiou Michalis Efthymiou 10.03.2023 14:22
Throughout the day, investors will be concentrating largely on the Non-Farm Payroll figure and will be preparing for the next weekly inflation data. Altogether, there will be 4 major announcements over the next week. This afternoon investors will be monitoring February Non-Farm Payroll, which is expected to return to previous figures. Economists expect the NFP figure to read 225,000, less than half of the previous month but still considerably high. Some economists believe the Unemployment rate may remain at 3.4%, whereas others lean towards 3.5%. However, the Unemployment rate would need to be significantly higher to lower inflation. Some analysts have stated the Unemployment rate would need to be more than 4% for the employment sector to become “more balanced”. Read the first part of the update by NAGA: Dow Jones has declined for 4 consecutive days and lost 1.7% yesterday| FXMAG.COM Investors should note that next week’s inflation figures will likely strongly influence the US Dollar and Stocks. Therefore, traders need to remember that investors will start to prepare for the inflation figures later in the day. The Consumer Price Index is expected to read 0.4%, which will keep the yearly inflation at a similar rate. Furthermore, investors are expecting the Producer Price Index to show 0.3%. If the employment and inflation data is higher than expected, investors will likely lean towards the Dollar as interest rates will accelerate. GBP/USD - Investors Brace for Non-Farm Payroll Results and Inflation Figures The GBP/USD continues to increase as the US Dollar generally weakens over the past 24 hours. The Pound has also been supported by the latest Gross Domestic Product figures released this morning. Even though the Pound has gained 1.35% since yesterday’s US session, investors still should be cautious of a potential downward trend. The exchange rate has still formed 3 significantly lower highs over the past 2-weeks. When looking at technical analysis, we are still waiting to get a major indication of a longer-term upward trend. However, this is possible if the price maintains momentum and surpasses 1.19628. Nonetheless, the price is currently trading at a resistance level and following a downward trend pattern. Traders await bearish indications from moving averages, crossovers, and price action. GBP/USD 2-Hour Chart on March 10th Global stocks over the past week have tumbled and have lost more than 4% since Tuesday’s Fed testimony. Since the reaction, the market has started buying bonds with a significantly higher yield than in previous years. This indicates that safe-haven assets are coming into play and can also affect the US Dollar. Though the US Dollar will only be able to act as a safe haven asset if interest rates remain competitive. Read next: USD/JPY Is Close To 137.00, EUR/USD Is Below 1.06, GBP/USD Is Trading Below 1.20| FXMAG.COM This morning the GBP/USD has been fueled by the UK GDP figure, which read 0.3% instead of the expected 0.1%. The figure is deemed positive for the Pound as it indicates the UK may be able to avoid a formal recession for the time being. The UK’s GDP figure was significantly higher than the previous month, which read -0.5%. Though traders should note that the price action can change if the NFP figure is higher than expected.
UK Gfk Consumer Confidence index got better fourth month in a row

Inflation in the UK still above 10%. OBR projects it may decline to 2.9% by the end of the year

Kenny Fisher Kenny Fisher 15.03.2023 23:45
The British pound has taken a nasty tumble on Wednesday. In the North American session, GBP/USD is trading at 1.202, down 1.1% on the day. Credit Suisse drags down US banking sector, boosts US dollar Since the collapse of the Silicon Valley Bank, the financial markets have been on a roller-coaster ride. Today the ride has been straight down, as equity markets are sharply lower. Credit Suisse, a major Swiss bank, saw its shares slump 25% today and fall to a record low, after Saudi National Bank, Credit Suisse’s largest investor, said it would not provide further funding. This has put further pressure on the already reeling financial sector and sent the shares of US banks sharply lower today. The financial crisis has dampened risk appetite, which has boosted the safe-haven US dollar higher against all the majors except the Japanese yen, which is also a safe-haven asset. Read next: Facebook and Instagram parent Meta has announced discontinuing NFT support on mentioned platformed | FXMAG.COM Today’s US releases, led by retail sales, were a disappointment. The retail sales headline figure came in at -0.4% m/m, missing the estimate of -0.3% and well off the January reading of an upwardly revised 3.2%. The core rate slowed as expected to -0.1%, after an upwardly revised 2.4% gain in January. The Producer Price Index also slowed in February and the NY Empire State Manufacturing Index fell by -24.6, compared to -5.8 prior. The soft data has raised the likelihood of a Fed pause at the March 22 meeting, with the markets pricing the odds of a pause or a 25-bp hike at close to 50/50. Just a week, ago the markets were expecting the Fed to hike by 50 bp at next week’s meeting. Inflation in the UK remains above 10%, which has taken a significant toll on households. Real household disposable income is expected to fall by some 5.7% over the next two years, according to the Office for Budget Responsibility (OBR). That would mark the biggest two-year drop since records began in 1956. The OBR had a surprisingly optimistic view on inflation, however, projecting that it would fall to just 2.9% by the end of the year. GBP/USD Technical GBP/USD has broken below support at 1.2113. The next support level is at 1.1984 There is resistance at 1.2294 and  and 1.2474 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. British pound sinks on banking sector fears - MarketPulseMarketPulse
Bank of England raised the interest rate for the 12th meeting in a row

British pound against US dollar - UK inflation expectations got reduced

Kenny Fisher Kenny Fisher 17.03.2023 14:31
We have seen some strong movement from the British pound this week, which is not surprising given the turmoil which has gripped the financial markets in the wake of the US banking crisis. In the European session, GBP/USD is showing little movement and is trading at 1.2119. Big banks to the rescue Market mayhem has been the buzzword this week, as the financial markets were shaken by the collapse of Silicon Valley Bank (SVB) over the weekend. The contagion spread and Credit Suisse, Switzerland’s second-largest bank saw its shares tumble 30% on Wednesday. In the US, shares of First Republic Bank, a mid-size bank, sank after a run on the bank by depositors. The major US banks sprang into action, fearing that the contagion would spread to mid-size and small banks. Bank of America, Goldman Sachs and others pledged to lend First Republic $30 billion. The rescue plan is unprecedented and nervous markets are hopeful that the crisis will not worsen. The Fed and the US government are also watching developments with bated breath. Treasury Secretary Yellen told a Senate finance committee that the US banking system is “sound” and that there would be a review of what went wrong at SVB. For now, the big bank rescue plan has calmed fears and risk appetite has improved. Still, with bank shares moving up and down like a yo-yo this week, caution sounds like sound advice for traders. Read next: Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen| FXMAG.COM The Fed holds its policy meeting on March 22nd and market pricing has been all over the map. Earlier in the week, it was a toss-up between a 25-basis point hike or a pause, according to the CME Group. The big bank rescue plan has shifted the odds to 79% for a 25-bp increase and 21% for a pause in hikes. I would not be surprised to see further market repricing ahead of the Fed meeting. In the UK, there was some welcome news on the inflation front. Inflation Expectations eased to 3.9% in February, down from 4.8% in January and a 5-month low. Inflation is running at a 10.1% clip, but the drop in inflation expectations could signal that inflation is headed back into single digits. GBP/USD Technical GBP/USD tested resistance at 1.2164 earlier in the Asian session. The next resistance line is 1.2294 There is support at 1.2113 and 1.1984 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD - Pound steady, inflation expectations ease - MarketPulseMarketPulse
UK Gfk Consumer Confidence index got better fourth month in a row

Although, there are no crucial releases this week, but that doesn't mean it will be a resilient week for GBP

Kenny Fisher Kenny Fisher 27.03.2023 15:42
The British pound is trading quietly on Monday. In the European session, GBP/USD is trading at 122.49, up 0.15%. The pound has looked sharp of late, and last it touched a high of 1.2343, its highest level since late January. In the UK, there are no tier-1 releases this week, but that doesn’t mean it will be a quiet week for the pound. Investors will be listening closely as BoE Governor Bailey speaks at public engagements today and on Tuesday. The latter should be especially interesting, as Bailey will testify before the Treasury Select Committee about the Silicon Valley collapse. Bailey to testify on SVB collapse Bailey has sounded surprisingly optimistic, given that inflation remains in double digits despite the BoE raising rates 11 consecutive times. After the 25-bp rate hike earlier this month, Bailey said that he expected inflation to fall “quite rapidly” in the next few months. On Friday, Bailey said that the prospects for growth were better and there was a “pretty strong likelihood” that the country would avoid a recession this year. I’m not at all sure that lawmakers share the Governor’s optimism, and they will likely grill Bailey on the Bank’s rate policy, which has failed to reign in high inflation. Sticky inflation is not the only headache that Bailey needs to deal with. The banking crisis has caused stress in the financial markets, and investors remain concerned about the stability of the banking sector. Authorities in Switzerland and the US have acted quickly and decisively, which has helped calm down the markets. President Biden and Treasury Secretary Yellen have said that the banking system is safe, and on Friday, the Financial Stability Oversight Council, a group of financial regulators, said that the US banking system remains “sound and resilient”. The stresses on the banking system are being closely watched by central banks, which are fearful of the contagion spreading as well as a credit crunch, which could slow economic growth. ECB President Lagarde said last week that the bank crisis could help lower inflation, and UK lawmakers might ask Bailey if the crisis could dampen inflation in the UK. GBP/USD Technical GBP/USD is testing resistance at 1.2248. The next resistance line is 1.2341 There is support at 1.2152 and 1.2071 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. GBP/USD - Will BoE's Bailey shake up the British pound? - MarketPulseMarketPulse
Ipek Ozkardeskaya: BoE will certainly leave the door open for further hikes

Orbex's analyst on GBP/USD: It’s important to note that UK interest rates may be raised during the next BoE meeting in early May

David Kindley David Kindley 14.04.2023 12:02
GBP/USD is at its highest level in a year. Will the pound continue to strengthen and why? Let's hear from David Kindley, Market Strategist at Orbex. David Kindley (Orbex): The GBP/USD has been on a steady rise in 2023 due to the improvement in the UK’s economic outlook and on bets that the Bank of England (BoE) will be looking to raise interest rates more aggressively. The raising and lowering of interest rates is one of the biggest driving factors in the strength or weakness of a currency, and with BoE’s key rate currently at 4.25% there’s certainly some more firepower for the Bank of England in terms of raising its key rate in 2023. There are expectations for both central banks in the US and the EU to also raise their key rates in May, which means that we can expect a lot of volatility in the forex market David Kindley (Orbex): It’s important to note that UK interest rates may be raised during the next BoE meeting in early May, which could be a key period for both the pound, but also the Euro and the USD. There are expectations for both central banks in the US and the EU to also raise their key rates in May, which means that we can expect a lot of volatility in the forex market, with interest rate increases becoming more and more analogous to their respective currency’s upside potential. Read next: The report signaled that inflation continues to slow with consumer prices barely rising in March and gasoline prices dropping | FXMAG.COM
Bank of England hikes rates and keeps options open for further increases

Ben Laidler: Bank of England comments boost Sterling but could speed up the economic slowdown

eToro eToro 14.04.2023 14:17
Ben Laidler, Global Markets STrategist at eToro said: "Bank of England (BoE) governor Bailey's speech at the IMF meetings this week boosted the likelihood of a further UK interest rate hike and underlined how even isolated bank failures drive contagion into the economy. Recent bank failures were seen as isolated and would not divert the BoE from continuing to tighten monetary policy. It had the tools to successfully compartmentalise between financial conditions and fight what is the highest inflation of any major world economy. This makes a 12th rate hike at its May 11th meeting more likely. This hawkish view has helped make the Sterling the best-performing major currency versus the US dollar this year. "There are financial system issues that need to be looked at, from the need for more bank liquidity to the room for higher bank deposit guarantee levels. These guarantees are less than half the $250,000 level in the US, at £85,000 in the UK and €100,000 in Europe. This inevitable regulatory tightening will do more of the BoE’s work in cooling the economy and lowering inflation, by increasing costs for banks and leading them to cut their lending to companies and consumers. Ben Laidler, eToro’s Global Market Strategist  
ECB's Christine Lagarde not to announce the end of rate hikes?

Eurodollar has posted a new 12-month high. Check out FX Update by Saxo's John Hardy

John Hardy John Hardy 14.04.2023 15:42
Summary:  The US dollar has broken down to new lows against four of the G10 currencies after soft PPI data yesterday. EURUSD has posted a new 12-month high and getting the most attention, while USDJPY remains stuck in the range and the Antipodeans and Scandies have yet to confirm the greenback’s breakdown. Extension of the move lower will require a delicate balance of avoiding volatility in rates and “just right” economic data. Our Q2 Outlook, titled The Fragmentation Game is now out.Today's Saxo Market Call podcastToday's Global Market Quick Take: Europe from the Saxo Strategy Team FX Trading focus: USD rolls over to new lows as benign data for the inflation outlook keeps sentiment supported. The broad euro strength getting stretched. The “just right” US data for a disinflation out yesterday helped keep US treasury yields neutral and allow risk sentiment to remain bid ahead of an important earnings season that is set to kick off today (have a listen to the extensive preview in today’s Saxo Market Call podcast). Both core and especially headline US March PPI data were softer than expected and the jobless claims remain in the new range between 225 and 245k, suggesting a less tight, but still strong US labour market. Today we have a look at March US Retail Sales, with further relative weakness after the huge January surge in sales. The reaction pattern after the US data was telling, as the initial move lower in yields saw JPY reacting the most vigorously, but as yields reverted to unchanged, the JPY rally faded again and instead the recently quiet and rather weak Aussie roared to live, extending its rally to more than a figure off the days lows in AUDUSD and testing the important 0.6800 level on the AUDUSD chart. This coincides with copper rallying clear of resistance. Copper is a key proxy for the argument that Chinese growth set to accelerate and that the global electrification- and alternative energy push, which is very copper intensive. Alas, the copper move is wilting as of this writing, so stay tuned there. Anyone hoping for an Aussie rally extension needs some support from the metals/commodities space as long as the RBA is in pause mode. The EURUSD rally extension is discussed with the chart below. GBPUSD looks a bit less convincing as EURGBP has rallied sharply and outside of EURCHF, the euro strength is getting rather stretched here. Next week, Europe reports its flash April Manufacturing and Services PMI on Friday. Chart: EURUSDEURUSD broke above the higher water mark of the year at 1.1054 and traded to a new 12-month high into this morning’s session, driven in part by the policy divergence story, as the Fed is priced to reach peak rates in May/Jun or possibly already to have peaked, while another 75 basis points of further tightening is priced for the ECB through Sep/Oct with eventual cuts not seen likely until early next year (Fed already priced at 75 basis points below the current policy rate by the January 2024 FOMC meeting). It’s possible that EURUSD can wring more upside from this source, but hard to see a meaningful further widening of yield spreads when the market is pricing the Fed and ECB to have the same policy rate around the middle of the next year. Technically, the next objective is perhaps the 1.1275 area, which is the 61.8% retracement of the entire rally off the down-wave from the post-pandemic highs to the sub-0.9600 lows last year. Bears don’t have a case here unless we sharply reverse this latest up-move and close at least below 1.1000 to start.     Source: Saxo Group As I am about to publish, I see the story from Bloomberg discussing Japanese life insurers getting set to make their investment decisions for the year ahead – a massive risk for JPY flows. Take note! Table: FX Board of G10 and CNH trend evolution and strength.The broad sterling underperformance of the last few session is notable and worth watching for further developments. It’s certainly not driven by anything rates related, and the BoE’s Chief Economist Pill was even out talking up the potential for a “positive demand shock” in the UK economy yesterday, driven by low unemployment. Elsewhere, the franc leads the pack as the CHF tracks the strong euro with the cherry on top of soaring gold prices (SNB maintains large gold reserves).   Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Many USD pairs at key range levels, including USDSEK, NZDUSD and AUDUSD, which have yet to break meaningful levels. AUDUSD is perhaps the key one to watch as noted above. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – Canada Feb. Manufacturing Sales 1230 – US Fed’s Goolsbee (Voter 2023) to speak 1230 – US Mar. Retail Sales 1245 – US Fed’s Waller (Voter) to speak 1315 – US Mar. Industrial Production/Capacity Utilization 1400 – US Apr. Preliminary University of Michigan Sentiment Source: FX Update: USD breaks down, if not yet broadly. | Saxo Group (home.saxo)
Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little

Forex: British pound against US dollar - forecast on April 18th

InstaForex Analysis InstaForex Analysis 18.04.2023 10:05
Richmond Federal Reserve President Thomas Barkin made a statement that further strengthened the dollar. In his opinion, before talking about rate cuts, it is necessary not only to reduce inflation to target levels, which is 2.0%, but also to confirm that it stabilizes at the desired value. Such words instantly increased the chance of further growth in the Federal Reserve's refinancing rate. Moreover, today the dollar can further strengthen its positions. This time, however, it is due to macro data. In particular, thanks to the expected increase in the unemployment rate in the United Kingdom from 3.7% to 3.8%. Unemployment Rate (United Kingdom): The British pound approached last week's low against the US dollar during the price retracement, which is around the 1.2350 level. In this case, this value acts as a variable support level where we can see a decline in the volume of short positions. On the four-hour chart, the RSI technical indicator is hovering in the lower area of 30/50, which corresponds to the pullback. On the daily chart, the RSI is hovering in the upper area of 50/70, indicating an uptrend in the mid-term. On the four-hour chart, the Alligator's MAs are headed downwards, which corresponds to the current pullback. In the mid-term, the Alligator's MAs are headed upwards which reflects the quote's movement. Outlook In order to transform the pullback to a full-scale correction, the pair needs to stay below the 1.2350 level. Otherwise, this coordinate will become support from which a gradual increase in long positions will emerge. In this case, the quote will return to the local high of the medium-term trend. Read next: Forex: On Friday US dollar against Japanese yen increased by 0.9%| FXMAG.COM In terms of the complex indicator analysis, we see that in the short-term and intraday periods, technical indicators are pointing to a pullback. Meanwhile, in the mid-term period, the indicators are reflecting an upward cycle. Relevance up to 19:00 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/340705
Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?

Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?

Joe Jeffriess Joe Jeffriess 19.04.2023 14:39
One of today's morning key events was the release of the UK CPI which came in at 10.1% beating expectations. We asked Joe Jeffries from Eightcap to share his thoughts on the UK inflation print. Joe decided to deliver us with an insightful view on the British pound situation as well. We feel that the BOE will have to continue to hike rates and watch if CPI can finally dip below the 10% point Joe Jeffries (Eightcap): UK CPI beat expectations coming in higher at 10.1% above the 9.8% expected. While this level is below last month's 10.4% it still maintains the 10% and over level. Yes, CPI has decreased from its 11.1 Nov 22 peak, but the number remains above 10% and that's a stubbornly high figure when you compare it to other economies. The US for instance has seen a drop after taking action. So far the issue for the UK is that action hasn't delivered the desired result of a decline in the CPI figure. It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate? Can an already struggling UK economy handle further 50-point hikes? We feel that the BOE will have to continue to hike rates and watch if CPI can finally dip below the 10% point.  British pound Joe Jeffries (Eightcap): The GBP while boosted by the policy in the short term will continue to be subject to the USD influence. If the USD does weaken over time and the policy for the BOE remains hawkish we should continue to see the GBP appreciate. The GBPUSD saw a choppy start to 2023 but so far holds a 3.28% gain since the start of the year.  Read next: UK inflation goes above 10% seventh time in a row. Core inflation hit 6.2%| FXMAG.COM
InstaForex's Irina Manzenko talks British pound amid latest events

British pound against US dollar - analysis by InstaForex's Stefan Doll - April 21st

InstaForex Analysis InstaForex Analysis 21.04.2023 12:00
Trend analysis (Fig. 1). On Friday, the pair will attempt to go down from 1.2438 (the close of yesterday's candlestick) to the 76.4% retracement level of 1.2391 (the blue dotted line). A bullish correction will occur if the pair reaches the target. Fig. 1 (daily chart). Complex analysis: - indicator analysis - down; - Fibonacci levels - down; - volumes - down; - candlestick analysis - down; - trend analysis - up; - Bollinger bands - up; - weekly chart - down. Final thoughts: Today, the pair will attempt to go down from 1.2438 (the close of yesterday's candlestick) to the 76.4% retracement level of 1.2391 (the blue dotted line). A bullish correction will occur if the pair reaches the target. In such a case, the mark of 1.2467 will stand as the next target. Read next: Bitcoin to US dollar - technical analysis by Petar Jacimovic on April 21st| FXMAG.COM Alternatively, from the level of 1.2438 (the close of yesterday's candlestick), the price may fall to the 85.4% retracement level of 1.2373 (the blue dotted line). A bullish correction may occur if the pair reaches the target. In such a case, the mark of 1.2473 will stand as the next target (the daily candlestick formed on April 19, 2023). Relevance up to 07:00 2023-04-22 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341110
Bank of England raised the interest rate for the 12th meeting in a row

British pound against US dollar - forecast on April 24th, 2023

InstaForex Analysis InstaForex Analysis 24.04.2023 09:36
GBP/USD Last Friday, the pound tried to attack the support of the April 10th and 17th lows, just below which lies the MACD indicator line on the daily chart (1.2333). However, it failed, leaving a long lower shadow. Nevertheless, this candlestick shows what the price wants to achieve – reaching the MACD line. If it succeeds in its second attempt, the next target at 1.2273 will become available. To disrupt the main bearish plan and develop the situation according to the alternative bullish scenario, the price must consolidate above the nearest resistance level of 1.2447 – above the January 23rd high. Despite the formally opened target of 1.2598, the price will still have two intermediate levels: 1.2524 and 1.2545 – the April 4th and 14th highs, so such a strong growth (up to 1.2598) is possible only if the Federal Reserve eases its policy. Read next: IG analyst to FXMAG.COM: In my opinion commodity prices already reflect higher oil prices| FXMAG.COM On the four-hour chart, the price is trying to climb above the MACD indicator line for the third time. The coincidence of this line with the 1.2447 level and the oscillator's downward reversal currently appear as strong arguments in favor of the bears. It is possible that the price will settle within the range (with its upper limit at 1.2447) for the entire week in anticipation of the Fed meeting on May 3rd. Relevance up to 04:00 2023-04-25 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341205
UK Gfk Consumer Confidence index got better fourth month in a row

Trading plan for the US session - British pound against US dollar - April 27th

InstaForex Analysis InstaForex Analysis 27.04.2023 14:09
In my morning forecast, I drew attention to the level of 1.2454 and recommended making decisions on entering the market from there. Let's look at the 5-minute chart and figure out what happened there. The decline and breakthrough at this level occurred without a false breakout, so it was impossible to get a buy signal. Similarly, there was no proper consolidation with a reverse test of 1.2454 from bottom to top, so I did not see a sell signal. The technical picture was revised for the second half of the day. To open long positions for GBP/USD, you need the following: If the data on the growth rate of the US economy in the first quarter of this year is satisfactory, it will be quite difficult for bulls to break above 1.2485. For this reason, I advise acting on a decline in the area of 1.2450 – a new support formed due to the first half of the day. The formation of a false breakout there, where the moving averages also pass, playing on the side of the bulls, will allow for a new entry point for long positions with the prospect of a surge in the area of 1.2485, which is the maximum of today. The breakthrough and reverse test from top to bottom of this range will form an additional signal to buy the pound with a movement to 1.2512. The farthest target will be the area of 1.2542, where I will fix the profit. Read next: Cryptocurrency payments are steadily increasing, particularly as the DeFi market rebounds from the ‘crypto winter’| FXMAG.COM In the scenario of a decrease to 1.2450 amid excellent US GDP and the absence of activity from the bulls, it is better not to rush with purchases. In this case, I will open long positions only on a false breakout in the area of the next support at 1.2422. I plan to buy GBP/USD immediately on the rebound only from a minimum of 1.2387, with a target of 30-35 points correction within the day. To open short positions for GBP/USD, you need the following: Sellers showed themselves but could not catch the daily lows and the new level of 1.2450. If US GDP turns out to be quite good, which in theory will help the Federal Reserve continue to raise interest rates, a false breakout in the new resistance at 1.2485 will give a chance for a pound correction with the prospect of updating the new support at 1.2450. The breakthrough and reverse test from the bottom to the top of this range will increase the pressure on GBP/USD, forming a sell signal with a decline to 1.2422. The farthest target remains the minimum of 1.2387, where I will fix the profit. In the case of GBP/USD growth in the second half of the day and the lack of activity at 1.2485, which is also quite likely, it is best to postpone sales until testing the next resistance at 1.2511. Only a false breakout there will provide an entry point for short positions. If there is no downward movement, I will sell GBP/USD on a rebound directly from the maximum of 1.2542, but only in the expectation of a pair correction down by 30-35 points within the day. The COT report (Commitment of Traders) on April 11 showed an increase in long positions and a decrease in short positions. The latest data from the UK leaves traders hopeful for further interest rate increases in the UK, which maintains an interest in the pound. Given that the Federal Reserve's aggressive policy is ending, and the Bank of England has no choice but to continue raising interest rates and fighting double-digit inflation, one can expect the demand for the pound to continue. The correction will be a good reason to enter long positions. The latest COT report states that non-commercial short positions decreased by 3,882 to 57,326, while non-commercial long positions jumped by 8,513 to 54,928. This has led to a sharp reduction in the negative value of the non-commercial net position to -2,398 compared to -14,793 a week earlier. The reduction has been taking place for the third week in a row, which also confirms the bullish nature of the market. The weekly closing price decreased to 1.2440 from 1.2519. Indicator signals: Moving Averages Trading is taking place above the 30- and 50-day moving averages, indicating an attempt by bulls to take the initiative. Note: The author considers the period and prices of moving averages on the H1 hourly chart and differ from the general definition of classic daily moving averages on the D1 daily chart. Bollinger Bands In the case of a decline, the lower border of the indicator will act as support in the area of 1.2450. Indicator Descriptions • Moving average (averaging, determines the current trend by smoothing out volatility and noise). Period 50. Marked on the chart in yellow. • Moving average (averaging, determines the current trend by smoothing out volatility and noise). Period 30. Marked on the chart in green. • MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Fast EMA period 12. Slow EMA period 26. SMA period 9 • Bollinger Bands (Bollinger Bands). Period 20 • Non-commercial traders - speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting certain requirements. • Non-commercial long positions represent the total long open position of non-commercial traders. • Non-commercial short positions represent the total short open position of non-commercial traders. • The total non-commercial net position is the difference between the short and long positions of non-commercial traders. Relevance up to 13:00 2023-04-28 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341637
UK Gfk Consumer Confidence index got better fourth month in a row

British pound against US dollar - trading plan by Gven Podolsky

InstaForex Analysis InstaForex Analysis 28.04.2023 13:08
Details of the economic calendar on April 27 The first estimate of the United States GDP for the first quarter showed growth of only 1.1%, while analysts expected 2%. The steady slowdown of the economy and the potential slide into recession are undoubtedly not the best factors for the U.S. dollar, although the U.S. currency did not react at the time of data publication. At the same time as the GDP data, figures for jobless claims in the U.S. were published, where the overall index was forecasted to rise, but actual data recorded a decline. The details of the statistical data show that the volume of continuing claims for benefits fell from 1.861 million to 1.858 million, while the volume of initial claims for benefits fell from 246,000 to 230,000.     Analysis of trading charts from April 27 EURUSD again rebounded from the high of the medium-term trend, and now sellers have a support at the level of 1.1000, which is already known in the market. GBP/USD this week continued to fluctuate within the side channel 1.2350/1.2550 without radical changes. Such situation allows traders to work on the rebound tactic. Economic calendar for April 28 Today, the publication of E.U. GDP data is expected, which may reflect a slowdown in the pace of economic growth. This is not yet a recession, but such a sharp slowdown in growth rates may indicate its approach. Time targeting: EU Q1 GDP – 09:00 UTC EUR/USD trading plan for April 28 In this scenario, the pullback can be considered a transitional stage for the regrouping of trading positions. If the price returns above the 1.1100 level, it may lead to new growth and the prolongation of the medium-term upward trend. However, if the price returns below the 1.1000 level during the day, it may lead to a new stagnation stage and a reduction in long positions volume.     GBP/USD trading plan for April 28 While the quote is within the sideways channel, the rebound tactic remains optimal for traders. However, attention should be paid to the breakout tactic, which can lead to significant price changes and indicate the further direction of movement. If the price holds above the 1.2550 level for 4 hours, a prolongation of the medium-term upward trend is possible. In turn, if the price holds below the 1.2350 level, it may lead to the construction of a corrective movement.     What's on the charts The candlestick chart type is white and black graphic rectangles with lines above and below. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time frame: opening price, closing price, intraday high and low. Horizontal levels are price coordinates, relative to which a price may stop or reverse its trajectory. In the market, these levels are called support and resistance. Circles and rectangles are highlighted examples where the price reversed in history. This color highlighting indicates horizontal lines that may put pressure on the asset's price in the future. The up/down arrows are landmarks of the possible price direction in the future. Relevance up to 10:00 2023-04-29 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341727
Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little

Bank of England expects inflation to to fall to 3% within 12 months. US inflation decreases a little

Kenny Fisher Kenny Fisher 11.05.2023 13:04
BoE likely to raise rates by 25 bp US to release PPI and unemployment claims later today GBP/USD is trading at 1.2587 in Europe, down 0.30% on the day. BoE expected to raise rates by 25 bp The Bank of England is expected to raise rates today for a 12th consecutive time, with a 25-basis point hike. This would bring the benchmark cash rate to 4.50%. The BoE can’t be faulted for not being aggressive, but it failed to react to rising inflation fast enough and has found itself playing catch-up with inflation. In March, CPI dipped but remained in double digits, at 10.1%. This has led to a severe cost-of-living crisis and the BoE has little choice but to continue raising rates until it is clear that inflation is on a downswing. The BoE remains optimistic and projected in February that inflation would fall to 3% within 12 months. This may be a bit of a stretch but I expect inflation to fall more quickly as the rate hikes make themselves felt and cool economic activity. The rate hike itself is unlikely to move the dial on the pound, but Bank statement and updated economic forecasts, especially with regard to inflation, could result in a market reaction. US inflation dips lower The US inflation report for April showed a small drop, with headline CPI falling from 5.0% to 4.9%. Still, the financial markets were pleased and the US dollar lost ground. Investors appeared to focus on one particular indicator that declined (CPI Core Services Ex-Housing) while ignoring that Core CPI was almost unchanged at 5.5%. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM The markets are widely expecting a pause in June, with a 91% probability, according to the CME Group. With the core rate remaining sticky, I am doubtful that the Fed is considering any rate cuts at this stage, although the markets have mostly priced in a cut in September. GBP/USD Technical GBP/USD tested support at 1.2573 earlier in the day. The next support level is 1.2475 1.2676 and 1.2789 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. GBP/USD edges lower ahead of BoE meeting - MarketPulseMarketPulse
Kenny Fisher talks British pound against US dollar. UK economy declined 0.3% in March, Bank of England chose the 25bp variant

Kenny Fisher talks British pound against US dollar. UK economy declined 0.3% in March, Bank of England chose the 25bp variant

Kenny Fisher Kenny Fisher 12.05.2023 14:29
UK GDP remains steady at 1% in Q4 BoE raises rates by 25 bp BoE revises upwards its growth, inflation forecasts UoM consumer sentiment expected to slow GBP/USD is trading at 1.2517 in Europe, almost unchanged. In the UK, GDP declined by 0.3% in March m/m, below the 0.1% estimate and the February reading of 0.0%. Still, the economy managed to gain 0.1% in the first quarter, unchanged from Q4 2022 and matching the estimate. BoE raises rates by 25 bp, revises inflation, GDP forecasts There was no surprise as the Bank of England raised rates by 25 basis points, bringing the cash rate to 4.50%, its highest since 2008. This marked the twelfth consecutive hike in the current rate-tightening cycle, underscoring the BoE’s pledge to curb hot inflation. Governor Bailey said after the rate announcement that Bank would “stay the course to make sure that inflation falls all the way back to the 2% target”. Nobody is expecting that the road to 2% will be easy, with inflation currently in double digits. The BoE remains optimistic that inflation will fall rapidly during the year and will fall to 5% by the end of the year. In February, the BOE predicted 4% inflation by the end of the year. This seems like a tall order but is certainly possible if the rate hikes make themselves felt and cool the economy. Read next: New Zealand dollar against US dollar decreased by 1.07% yesterday| FXMAG.COM There have been constant concerns that the BoE’s aggressive rate policy would lead to a recession, and six months ago, the BoE had projected a recession. Bailey reversed course yesterday, saying that the drop in energy prices and stronger economic growth meant that GDP would expand by a weak 0.25% in 2023, versus the 0.5% contraction in the previous forecast. In the US, the economy is showing signs of cooling and high interest rates are expected to dampen the robust labour market. Unemployment claims surprised on the upside on Thursday, rising from 245,000 to 264,000, well above the estimate of 242,000. This is just one weekly report, but it’s sure to raise speculation that the labour market is showing cracks. The US wraps up the week with UoM Consumer Confidence, which is pointing to a rather sour US consumer. The indicator fell to 63.5 in April and is expected to ease to 63.0 in May. Weak consumer confidence can translate into a decrease in consumer spending, a key driver of economic growth. GBP/USD Technical GBP/USD is putting pressure on support at 1.2495. The next support level is 1.2366 1.2573 and 1.2676 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. GBP/USD flat as UK GDP a mixed bag - MarketPulseMarketPulse
According to InstaForex analyst, demand for British pound may not increase soon

Yesterday GBP gained 80 points. British pound against US dollar - what can we expect from the pair?

InstaForex Analysis InstaForex Analysis 16.05.2023 09:18
GBP/USD Yesterday, the British pound grew by 80 points, but it is still within the bounds of a correction from the fall from 1.2678. The signal line of the Marlin oscillator (daily) is in negative territory, so the price may rise a bit more in continuation of this correction. On the four-hour chart, the price has reached the 38.2% correction level and is consolidating under it. If the price manages to break through yesterday's high at 1.2533 (and a more confident signal with crossing Friday's peak of 1.2539), then it can continue to rise to the next Fibonacci correction level of 50.0% (1.2560) and even to the level of 61.8%, where strong technical lines of the target level of 1.2583 and the MACD line on the 4-hour chart have already accumulated. Overcoming this strong resistance may extend the rally to 1.2678 or even higher. The end of the correction will be indicated by the price consolidating below the Fibonacci level of 23.6% at the price of 1.2498. Read next: Federal Reserve isn't prepared to cut rates - gold may face challenges| FXMAG.COM Relevance up to 04:00 2023-05-17 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/343209
UK Gfk Consumer Confidence index got better fourth month in a row

What are the possible scenarios for GBP/USD? British pound against US dollar - inidicator analysis

InstaForex Analysis InstaForex Analysis 19.05.2023 11:20
Trend analysis (Fig. 1). The market may move upward from the level of 1.2404 (closing of yesterday's daily candle) with the target of 1.2460, the historical resistance level (blue dotted line). Upon reaching this level, a downward movement is possible with the target of 1.2422, the 76.4% pullback level (blue dotted line). Fig. 1 (daily chart). Comprehensive analysis: Indicator analysis - up; Fibonacci levels - up; Volumes - up; Candlestick analysis - up; Trend analysis - up; Bollinger bands - up; Weekly chart - up. General conclusion : Today, the price may move upward from the level of 1.2404 (closing of yesterday's daily candle) with the target of 1.2460, the historical resistance level (blue dotted line). Upon reaching this level, a downward movement is possible with the target of 1.2422, the 76.4% pullback level (blue dotted line). Read next: What are the possible scenarios for EUR/USD? Euro against US dollar - inidicator analysis| FXMAG.COM Alternatively, the price may move downward from the level of 1.2404 (closing of yesterday's daily candle) with the target of 1.2343, the lower fractal (blue dotted line). Upon reaching this level, an upward movement is possible with the target of 1.2432, the 14.6% pullback level (red dotted line). Relevance up to 09:00 2023-05-20 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/343650
InstaForex's Irina Manzenko talks British pound amid latest events

GBP/USD eases from daily peak, up a little below mid-1.2400s ahead of Fed’s Powell

FXStreet News FXStreet News 19.05.2023 16:06
By Haresh Menghani GBP/USD stages a goodish recovery from over a three-week low amid a modest USD pullback. Hawkish Fed expectations and the US debt ceiling optimism should help limit the USD losses. Traders also seem reluctant to place fresh directional bets ahead of Fed Chair Powell’s speech. The GBP/USD pair shows some resilience below the 50-day Simple Moving Average (SMA) on Friday and stages a solid bounce from sub-1.2400 levels, or over a three-week low touched the previous day. The pair, however, retreats a few pips from the daily high touched during the early North American session and currently trades around the 1.2435-1.2445 region, up nearly 0.25% for the day. The risk-on impulse - as depicted by a generally positive tone around the equity markets - prompts some profit-taking around the safe-haven US Dollar (USD), especially after the recent runup to a nearly two-month high. This, in turn, is seen as a key factor lending support to the GBP/USD pair, though the upside potential seems limited. Firming expectations that the Federal Reserve (Fed) will keep interest rates higher for longer, along with the latest optimism over the US debt ceiling deal, continue to push the US Treasury bond yields higher and favour the USD bulls. Read next: EUR/USD Price Analysis: Initial support turns up near 1.0760| FXMAG.COM In fact, a slew of Fed officials this week expressed concerns that inflation in the United States (US) was not cooling fast enough and forced investors to scale back their bets for interest rate cuts later this year. In fact, the current market pricing indicates a small chance of another 25 bps lift-off at the next FOMC policy meeting in June. Furthermore, top US congressional Republican Kevin McCarthy said on Thursday that negotiations are at a better place than last week and expected a bill to raise the government's $31.4 trillion debt ceiling on the House floor next week. The aforementioned fundamental backdrop might hold back traders from placing aggressive bearish bets around the Greenback. Apart from this, expectations that fewer rate increases by the Bank of England (BoE) will be needed in the coming months to bring down inflation further contributes to capping gains for the GBP/USD pair. Investors also prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's speech, which might provide clues about future rate hikes. This will drive the near-term USD price dynamics and provide a fresh directional impetus to the major.
Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

Michael Hewson Michael Hewson 23.05.2023 10:41
European markets got off to a slow start to the week yesterday, finishing slightly lower, with the FTSE100 outperforming, with sentiment subdued ahead of the resumption of debt ceiling talks later in the day. US markets didn't fare much better with modest gains for the Nasdaq 100 which posted a new one year high, before slipping back, while the S&P500 finished the day unchanged, while markets in Asia slipped back as debt ceiling talks began again. In a similar pattern to last week, US yields also edged back towards their highs of last week on the back of hawkish comments from St. Louis Fed President James Bullard, who said he expected to see another 2 rate hikes this year, and Minneapolis Fed President Neel Kashkari who gave a slightly more nuanced view, saying that it might be prudent to pause in June to evaluate progress, although it remained a close call. Kashkari did go on to add that rates might need to go to 6% if inflation is more persistent than expected. Yesterday's caution looks set to carry over into today's European open where we look set to see a flat open, as we look ahead to European flash PMIs, as well as the latest UK public sector borrowing numbers. In March, the government saw borrowing increase by £21.5bn, the second highest March figure since records began, as the curtain came down on a fiscal year that saw borrowing expand sharply due to rising interest rates, and the energy price cap. Nonetheless the picture could have been worse with total borrowing for 2023 coming in at £139.2bn, significantly below some of the more pessimistic expectations that were laid out at the end of last year. Nonetheless it was still £18.1bn higher than the previous year. As we look ahead to today's April numbers, the amount the government borrows on a monthly basis should start to come down now that the government is no longer contributing to consumers' monthly energy bills to the tune of £67 per month. Consensus forecasts are for borrowing to slow to £19.1bn in April.   One of the more notable trends we've seen in recent months has been an ongoing divergence between services sector activity and manufacturing activity. All across the board manufacturing PMI have got progressively weaker, or has struggled with prices also falling back, while employment measures have been stagnating. Compare that to services sector activity which has been improving and has continued to do so into Q2 as falling energy prices help to free up disposable income and thus prompt a bit of a consumer rebound. The bigger question comes about how long this trend can continue, as we head into Q2, and although pricing pressures have been slowing, prices have still been rising, notably when it comes to wages. In Germany services activity rose to a one year high in April, as did France, while manufacturing slipped further into contraction. Read next: Nikkei 225 hit its highest price since 1990. US Core PCE inflation numbers are expected to hit 4.3%| FXMAG.COM UK numbers exhibited similar traits, with strong services, and weak manufacturing. Will this continue in May, or are we at risk of a pullback when it comes to services when the data is released later this morning?   Expectations are for manufacturing activity to improve modestly across the board with France, Germany and UK readings forecast to come in at 46, 45 and 48 respectively. Services on the other hand are expected to slow modestly to 54, 55 and 55.3, with the extra bank holiday in May potentially acting as a drag on UK activity.   Forex EUR/USD – continues to struggle near to the 1.0840 area for the time being. We need to see a move through 1.0840 to target a return to the 1.0920 level. Still have support at the 1.0760 area, with a break below 1.0760 targeting a potential move towards 1.0610, with initial support at 1.0710. GBP/USD – still finding support just above the 1.2370/80 trend line support from the October lows last year. Resistance currently all the way back at 1.2540. Below 1.2360 opens the potential for a move back towards 1.2270.   EUR/GBP – finding resistance just below the 0.8740 area and the 200-day SMA, while holding above the May low at 0.8660 key support. A move below 0.8650 could see a move towards 0.8620. USD/JPY – finding support just above the 200-day SMA at 137.00. While above here the risk is for a move towards 139.60 which is a 50% retracement of the down move from the recent highs at 151.95 and lows at 127.20. A fall below 136.80 targets a return to 135.60. FTSE100 is expected to open 4 points higher at 7,775 DAX is expected to open unchanged at 16,224 CAC40 is expected to open 3 points lower at 7,475
InstaForex's Irina Manzenko talks British pound amid latest events

InstaForex's Irina Manzenko talks British pound amid latest events

InstaForex Analysis InstaForex Analysis 23.05.2023 18:52
Today, the GBP/USD pair came under pressure due to cautious statements by the head of the Bank of England, the overall strengthening of the greenback, and a decline in British PMI indices. Due to these fundamental factors, GBP/USD bears approached the support level 1.2360. At this price point, the lower line of the Bollinger Bands indicator on the daily chart coincides with the upper boundary of the Kumo cloud. If sellers overcome this target, the next target for the southern movement will be 1.2250 (the middle line of the Bollinger Bands, which coincides with the Kijun-sen line on the weekly chart). However, it is still too early to talk about the development of a southern trend. Traders reacted situationally to the circumstances, but even impulsively, they could not break the price barrier at 1.2360. The uncertain situation with the dollar forces GBP/USD sellers to act cautiously and prudently.   Looking at the weekly chart of GBP/USD, we can see that from early March to the end of April, the pair demonstrated a pronounced upward trend, rising from 1.1800 to a multi-month high of 1.2680. The result is impressive: the price increased by almost 900 points in just two months, not only due to the weakening of the greenback. The British currency also contributed, primarily thanks to the hawkish stance of the Bank of England. However, the pair has shown a downward dynamic over the past three weeks. And again, the English regulator played a significant role in this. By raising the interest rate by 25 basis points at its last meeting, the Bank of England clarified that the next increase is under question. The regulator hinted that another round of monetary policy tightening would occur only in case of further inflationary indicators' growth. The central bank also emphasized its attention to the side effects of tightening monetary policy. It is worth noting that key labor market data was published in the UK last week. The release disappointed GBP/USD buyers: almost all components of the report were in the "red zone." In particular, the unemployment rate in the country rose to 3.9% against a forecast of 3.8% growth. This is the worst result since February 2022. The number of unemployment benefits claims increased by nearly 47,000 in April, with a forecast of a 30,000 rise. This result is the worst since February 2021. Previously published data on UK economic growth also came in the "red zone." The country's GDP increased by only 0.2% year-on-year in the first quarter, following a 0.6% growth in the fourth quarter of last year. At the same time, the recent report on British inflation surprised with its "green hue": the overall consumer price index rose to 10.1% year-on-year, while most experts predicted a decrease to 9.8%. The core index remained at the February level (6.2%) in March, while most analysts forecasted a decrease to 6.0%. Read next: What are the possible scenarios for GBP/USD? British pound against US dollar - inidicator analysis| FXMAG.COM Considering this disposition, the Bank of England hypothetically "can afford" to tighten its rhetoric. However, judging by today's speech by the head of the English regulator, the central bank's leadership is ready for a pause. Today, Andrew Bailey answered questions from members of the Treasury Committee of the UK Parliament regarding the Bank of England's May report on monetary policy. The main message of his speech can be summarized in one phrase: further tightening of monetary policy will be required if there are signs of more sustainable price pressures. Moreover, according to Bailey, inflation has already passed a turning point ("inflation has turned a corner" literally). In other words, the interest rate's fate depends on the inflationary growth dynamics. That is why tomorrow's day can play a key role for the GBP/USD pair. The reason is that on May 24th, key data on inflation growth in the UK for April will be published. This release is important in itself, but in this case, its significance is difficult to overestimate in the context of further prospects for tightening monetary policy. According to preliminary forecasts, the Consumer Price Index (CPI) is expected to decrease sharply in April to 8.2% y/y (from the March value of 10.1%). The core CPI, excluding energy and food prices, should demonstrate a minimal but still downward trend, decreasing to 6.1% (from the current value of 6.2%). The Retail Price Index (RPI) is expected to decrease to 11.1% (from the March value of 13.5%). In addition, experts predict a sharp decline in the Producer Price Index (PPI) - from 7.6% to 3.8%. If the indicators mentioned above at least meet the forecasts (not to mention being in the "red zone"), the pound will come under significant pressure. In such a case, the GBP/USD bears may not only retest the support level at 1.2360 (where the lower line of the Bollinger Bands indicator on the daily chart coincides with the upper boundary of the Kumo cloud) but also decline towards the base of the 23rd figure. A "red hue" release will significantly reduce the probability of an interest rate hike at the June meeting, and this fact will exert background pressure on the GBP/USD pair. Relevance up to 12:00 2023-05-24 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/344013
According to InstaForex analyst, demand for British pound may not increase soon

According to InstaForex analyst, demand for British pound may not increase soon

InstaForex Analysis InstaForex Analysis 23.05.2023 18:55
  On Tuesday, business activity indices for May became known in many countries of the European Union, the United Kingdom, and the United States. In summary, business activity in European countries decreased, which led to a decline in demand for the euro and the pound. Nevertheless, unexpected news of the day came from the British Parliament, where several members of the Monetary Policy Committee spoke before the Treasury Select Committee. These speeches should have been included in yesterday's event calendar. Andrew Bailey answered the Committee's questions. In particular, he stated that inflation in the United Kingdom has already reached a turning point (i.e., its peak value). Inflation in the services sector aligns with the central bank's expectations. He assured the Bank of England would continue adjusting the interest rate to bring inflation back to the target level of 2%. However, additional tightening measures will be required if inflation shows signs of greater stability. According to Bailey, the labor market has begun to weaken slightly. Bailey's colleague, the Bank's Chief Economist, Hugh Pill, stated that long-term inflation expectations align with the Bank of England's forecast. However, he questioned why the regulator made errors in its calculations regarding the strength of inflation. The prospects for the British currency remain unchanged after the speeches by several Bank of England members. Andrew Bailey allowed for stronger tightening, but the market did not fully understand the reference point for such tightening. Currently, the regulator is expected to raise the interest rate at most one or two more times. Are these additional tightenings, or is it referring to increases beyond them? The demand for the pound did not change after Pill and Bailey's speeches, which is positive because the market is not ignoring the wave pattern that implies a decline in the instrument. Therefore, the decline may continue to the 18-20 figure range. Wave b can end as a corrective wave at any time, but the instrument's decline should be much stronger.     I don't see compelling reasons for the market to increase demand for the British pound soon. Britain consistently needs to improve its statistics, and the interest rate may stop rising in the coming months. Only Andrew Bailey knows at what pace inflation will fall, but he changes his forecasts every few months, usually toward an increase. The ECB in the European Union has also revised its inflation forecasts upward. All this tells us there will be a protracted struggle with high inflation rates. We must remember to reach 2% for another 1.5-2.0 years. The real possibility of quickly returning inflation to 2% lies only with the United States. However, in that case, the Federal Reserve will start lowering interest rates at the beginning of next year, which could significantly reduce demand for the dollar. And the market may start anticipating this factor in advance. Read next: InstaForex's Irina Manzenko talks British pound amid latest events| FXMAG.COM Based on the conducted analysis, I conclude that the upward trend phase has ended. Therefore, I recommend selling now, as the instrument has ample room for decline. Targets around 1.0500-1.0600 can be considered quite realistic. I advise selling the pair with these targets. The wave pattern of the pound/dollar pair has long indicated the formation of a new downward wave. Wave b can be very deep since all recent waves are approximately equal. The failed attempt to break the level of 1.2615, which corresponds to 127.2% Fibonacci, indicates the market's readiness for selling. In contrast, the successful attempt to break the level of 1.2445, equivalent to 100.0% Fibonacci, confirms this signal. I recommend selling the pound with targets around the 23 and 22 figures. Relevance up to 17:00 2023-05-24 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/344007
Bank of England hikes rates and keeps options open for further increases

UK economy: April inflation print showed a 1.2% rise in consumer prices. It's noticeably more than expected

Alex Kuptsikevich Alex Kuptsikevich 24.05.2023 13:03
Another release of UK consumer inflation well above expectations has failed to take the issue off the country's agenda. The report for April showed a 1.2% rise in consumer prices, compared to the 0.8% that markets were expecting this time and the previous month. Annual inflation slowed from 10.1% to 8.7% (8.2% was expected). This is a 13-month low, but still above the peak inflation levels in the early 1990s, when it was barely above 8% y/y. The core CPI hit a new multi-year high of 6.8% y/y. It was widely expected to remain at 6.2%. The Bank of England is likely to take note of this acceleration, which demonstrates the depth of the roots of inflation. In modern UK history, core and headline inflation have moved in the same direction, albeit to different degrees. Still, the current case is characterised by a sustained rise in core inflation. This divergence is due to a tight labour market and the associated increase in service prices, which continue to rise despite the reversal in commodity prices. Astonishing in this story is the persistence of price rises, mainly in the final consumption stage. Producer Price Index Input fell by 0.3% in April and has now fallen in four of the last six months. Over the past year, their rise has decreased to 4.0%. Read next: The volume of ETH in stacks has increased by over 4 million coins | FXMAG.COM Producer Price Index Output was unchanged for the third month, and the year-on-year rate of increase slowed to 5.4%, compared with 8.5% the previous month and a peak of 19.8% in July last year. Producer price trends tend to lead consumer price trends by several months. Immediately following the release of the inflation data, the GBPUSD rallied, at one point approaching 1.2470. This was likely the result of algorithmic strategies acting on above-expectation headline CPI numbers. However, the pound soon reversed and fell below 1.2390 for a few hours. This drop brought the British currency back into the downtrend of the last two weeks and prevented the cable from staying above its 50-day moving average. Technically, the decline has a high probability of extending to 1.2340-1.2350, the area of last month's lows and the 61.8% Fibonacci retracement level of the rise from 1.18 in March to 1.2680 in early May. It is also the area of the December and January highs, making a test of this area even more cautious. A solid move lower from current levels would signal a market shift in favour of the dollar for many weeks to come. The ability to hold these levels and move higher would signal that the Pound remains within the bullish trend that has been in place since late September.
GBP/USD Forecast: Explosive Upward Momentum Predicted, Historic Resistance in Sight!

GBP/USD Forecast: Explosive Upward Momentum Predicted, Historic Resistance in Sight!

InstaForex Analysis InstaForex Analysis 29.05.2023 10:35
GBP/USD may start moving upward this week, starting from the level of 1.2344 (closing of the last weekly candle) to 1.2499, which is a historical resistance level (blue dashed line). Upon reaching this price, the pair will climb further to 1.2678, which is an upper fractal (red dashed line).   Comprehensive analysis: Indicator analysis - upward Fibonacci levels - upward Volumes - upward Candlestick analysis - upward Trend analysis - downward Bollinger bands - upward Monthly chart - upward       All these point to an upward movement in GBP/USD. Conclusion: Most likely, the pair will have a bullish trend, with no first lower shadow on the weekly white candle (Monday - upward) and a second upper shadow (Friday - downward).   So during the week, pound will rise from 1.2344 (closing of the last weekly candle) to the historical resistance level at 1.2499 (blue dashed line), and then head to the upper fractal at 1.2678 (red dashed line).   Alternatively, the quote could go up from 1.2344 (closing of last week's candle) to the historical resistance level at 1.2499 (blue dashed line), and then turn around and fall down to the 38.2% retracement level at 1.2342 (red dashed line).  
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GBP: Battling the Overwhelming BoE Rate Hike Expectations! What's next for EUR/GBP?

ING Economics ING Economics 30.05.2023 08:51
GBP: Hard to fight the aggressive BoE pricing   Money markets now price 100bp of Bank of England tightening by November.   This would put the Bank Rate at 5.50%. Our team's view is that such an amount of tightening is highly unlikely and that the usually reticent Bank of England may try and verbally push back against it.   However, UK data is doing the most of the talking and it will probably be the jobs/wages data (13 June) or the May CPI data (21 June) which will be the key determinant on whether the market reins in aggressive tightening expectations.   Until then, EUR/GBP can probably press support at 0.8650, below which 0.8600/8610 is the next target. GBP/USD can better resist the stronger dollar. Support around the 1.2275/2300 area may hold temporarily.
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European Markets React to US Debt Ceiling Deal! A Mixed Open Expected. US Dollar Dominates CEE Markets: Concerns Over Economic Recovery Linger

Michael Hewson Michael Hewson 30.05.2023 09:11
Europe set for a mixed open, as debt ceiling deal heads towards a vote. By Michael Hewson (Chief Market Analyst at CMC Markets UK) With both the US and UK markets closed yesterday, there was a rather tepid response to the weekend news that the White House and Republican leaders had agreed a deal to raise the debt ceiling, as European markets finished a quiet session slightly lower. The deal, which lays out a plan to suspend the debt ceiling beyond the date of the next US election until January 1st 2025, will now need to get agreement from lawmakers on both sides of the political divide to pass into law. That could well be the hardest part given that on the margins every vote is needed which means partisan interests on either side could well derail or delay a positive outcome. A vote on the deal could come as soon as tomorrow with a new deadline of 5th June cited by US Treasury Secretary Janet Yellen. US markets, which had been rising into the weekend on the premise that a deal was in the making look set to open higher when they open later today, however markets in Europe appear to be less than enthused. That's probably due to concerns over how the economic recovery in China is doing, with recent economic data suggesting that confidence there is slowing, and economic activity is declining. Nonetheless while European stocks have struggled in recent weeks, they are still within touching distance of their recent record highs, although recent increases in yields and persistent inflation are starting to act as a drag. This is likely to be the next major concern for investors in the event we get a speedy resolution to the US debt ceiling headwind. We've already seen the US dollar gain ground over the last 3 weeks as markets start to price in another rate hike by the Federal Reserve next month, and more importantly start to price out the prospect of rate cuts this year. Last week's US and UK economic data both pointed to an inflationary outlook that is much stickier than was being priced a few weeks ago, with core prices showing little sign of slowing. In the UK core prices surged to a 33 year high of 6.8% while US core PCE edged up to 4.7% in April, meaning pushing back any possible thoughts that we might see rate cuts as soon as Q3. At this rate we'll be lucky to see rate cuts much before the middle of 2024, with the focus now set to shift to this week's US May jobs report on Friday, although we also have a host of other labour market and services data between now and then to chew over. The last few weeks have seen quite a shift, from the certainty that the Federal Reserve was almost done when it comes to rate hikes to the prospect that we may well see a few more unless inflation starts to exhibit signs of slowing markedly in the coming months. In the EU we are also seeing similar trends when it comes to sticky inflation with tomorrow's flash CPI numbers for May expected to show some signs of slowing on the headline number, but not so much on the core measure. On the data front today we have the latest US consumer confidence numbers for May which are expected to see a modest slowdown from 101.30 in April to 99, and the lowest levels since July last year. EUR/USD – has so far managed to hold above the 1.0700 level, with a break below arguing to a move back towards 1.0610. We need to see a rebound above 1.0820 to stabilise. GBP/USD – holding above the 1.2300 area for now with further support at the April lows at 1.2270. We need to recover back above 1.2380 to stabilise. EUR/GBP – currently struggling to move above the 0.8720 area, with main resistance at the 0.870 area. A move below current support at 0.8650 could see a move towards 0.8620. USD/JPY – having broken above the 139.60 area this now becomes support for a move towards 142.50 which is the 61.8% retracement of the down move from the recent highs at 151.95 and lows at 127.20. Further support remains back at the 137.00 area and 200-day SMA. FTSE100 is expected to open unchanged at 7,627 DAX is expected to open 17 points higher at 15,967 CAC40 is expected to open 30 points lower at 7,273
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Unveiling the GBP/USD Trading Puzzle: Navigating Low Volatility, Downtrend, and Signals for Profitable Trades

InstaForex Analysis InstaForex Analysis 30.05.2023 09:37
On Monday, the GBP/USD pair managed to show even lower volatility than the EUR/USD pair, with only 37 pips. Therefore, there is no point in analyzing the movements because there simply weren't any.     The entire day was characterized by absolute flatness, which is not surprising given the complete absence of fundamental and macroeconomic events, as well as the status of a holiday in the US.   The downward trend remains intact, so nothing has changed for the pound and the dollar: the latter should continue to rise. There are currently no trend lines or channels due to the weak movement, but there is no doubt about the downtrend.     If you tried really hard you could find one signal on the 5-minute chart. At the beginning of the European trading session, the pair technically bounced off the range of 1.2351-1.2367 but failed to move down even by 20 pips, which is not surprising considering the overall volatility of 37 pips.   Beginners could have opened a short position based on this signal, but by the start of the US session, the pair hardly moved, so the trade could have been closed practically anywhere with zero profit. Trading tips on   Tuesday: As seen on the 30M chart, the GBP/USD pair continues to trade lower, but in the past few days, we have observed more low-volatility flatness than trending movement. We continue to expect further decline as we believe that the pound has not fallen sufficiently strong yet.   The key levels on the 5M chart are 1.2171-1.2179, 1.2245-1.2260, 1.2351-1.2367, 1.2420, 1.2470, 1.2507-1.2520, 1.2597-1.2616. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. On Tuesday, there are no important events or reports scheduled in the UK or the US.   We are in for another completely dull day. Volatility may be low again, and there may be a lack of intraday trending movement. Basic rules of the trading system: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross.   This indicator is better to be used in combination with trend channels or trend lines.   Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair.   Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable.   The development of a reliable strategy and money management are the key to success in trading over a long period of time.    
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European Markets Sink Amid Recession Concerns and Oil Price Slump

Michael Hewson Michael Hewson 31.05.2023 08:09
With the White House and Republican leaders agreeing a deal on the debt ceiling at the weekend markets are now obsessing about whether the deal will get the necessary votes to pass into law, as partisan interests line up to criticise the deal.   With the deadline for a deal now said to be next Monday, 5th June a vote will need to go forward by the end of the week, with ratings agencies already sharpening their pencils on downgrades for the US credit rating. European markets sank sharply yesterday along with bond yields, as markets started to fret about a recession, while oil prices sank 4% over demand concerns. US markets also struggled for gains although the Nasdaq 100 has continued to outperform as a small cohort of tech stocks contrive to keep US markets afloat. As we look towards today's European open and the end of the month, we look set for further declines after Asia markets slid on the back of another set of weak China PMIs for May. We'll also be getting another look at how things are looking with respect to economic conditions in Europe, as well as an insight into some key inflation numbers, although core prices will be missing from this snapshot. French Q1 GDP is expected to be confirmed at 0.2% while headline CPI inflation for May is expected to slow from 6.9% to 6.4%. Italian Q1 GDP is also expected to be confirmed at 0.5, and headline CPI for May is expected to slow from 8.7% to 7.5%. We finish up with the flash CPI inflation numbers from Germany, which is also expected to see a slowdown in headline from 7.6% to 6.7% in May. While this is expected to offer further encouragement that headline inflation in Europe is slowing, that isn't the problem that is causing investors sleepless nights. It's the level of core inflation and for that we'll have to wait until tomorrow and EU core CPI numbers for May, which aren't expected to show much sign of slowing.   We'll also get another insight into the US jobs markets and the number of vacancies in April, which is expected to fall from 9.59m in March to 9.4m. While a sizeable drop from the levels we were seeing at the end of last year of 11m, the number of vacancies is still over 2m above the levels 2 years ago, and over 3m above the levels they were pre-pandemic. The size of this number suggests that the labour market still has some way to go before we can expect to see a meaningful rise in the unemployment rate off its current low levels of 3.4%. EUR/USD – slipped to the 1.0673 area before rebounding with the 1.0610 area the next key support. We need to see a rebound above 1.0820 to stabilise.   GBP/USD – rebounded from the 1.2300 area with further support at the April lows at 1.2270. Pushed back to the 1.2450 area and the 50-day SMA, before slipping back. A move through 1.2460 is needed to open up the 1.2520 area.   EUR/GBP – slid to a 5-month low yesterday at 0.8628 just above the next support at 0.8620. A move below 0.8620 opens up the December 2022 lows at 0.8558. Main resistance remains at the 0.8720 area.   USD/JPY – ran into some selling pressure at 140.90 yesterday, slipping back to the 139.60 area which is a key support area. A break below 139.50 could see a return to the 137.00 area, thus delaying a potential move towards 142.50 which is the 61.8% retracement of the down move from the recent highs at 151.95 and lows at 127.20.   FTSE100 is expected to open 22 points lower at 7,500   DAX is expected to open 64 points lower at 15,845   CAC40 is expected to open 34 points lower at 7,175
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Deciphering Tuesday's GBP/USD Rebound and Analyzing Trading Strategies for the Week Ahead

InstaForex Analysis InstaForex Analysis 31.05.2023 09:04
Analyzing Tuesday's trades GBP/USD on 30M chart   On Tuesday, the GBP/USD pair displayed a significant rebound, which is difficult to explain from a fundamental or macroeconomic perspective. In addition, a new descending trendline has formed, which clearly passes through the three recent price peaks.   Thus, despite the British currency's growth, the downtrend persists. There was no macro data or fundamental background in either the UK or the US. Therefore, it is quite difficult for us to explain what caused the dollar's decline. However, technical corrections are still relevant, so the sudden growth shouldn't be that surprising. So far, nothing bad has happened to the downtrend.   The pound may fall as early as Wednesday, especially considering that the pair has already started to fall by the end of Tuesday. Moreover, there will be significant events and reports in the last three days of the week, which may prompt traders to buy the dollar again, regardless of their positions.     Several trading signals were formed on the 5-minute chart on Tuesday. The levels 1.2351 and 1.2367 will be removed from the charts. The levels 1.2307 and 1.2386 have been added, but they were not included in the signal formation process. The first sell signal was near the 1.2351 level. The pair managed to move down by only 15 pips, resulting in a loss when the price settled above the 1.2367 level. This same signal should have been executed using long positions, and the pair subsequently rose to the 1.2420 level and settled above it. The long position should have been closed when the price settled below this level. Immediately after that, short positions should have been opened, which should have been manually closed closer to the evening. As a result, the first trade ended in a loss, but the other two were profitable. Overall, novice traders made a profit. Trading tips on Wednesday: As seen on the 30M chart, the GBP/USD pair is generally moving down, but over the past week, we have seen more of a flat than a trend-driven movement. I expect the pound to fall further since it has not fallen enough yet. Breaking the new trendline may temporarily change market sentiment to bullish. The key levels on the 5M chart are 1.2171-1.2179, 1.2245, 1.2307, 1.2386, 1.2420, 1.2470, 1.2507-1.2520, 1.2597-1.2616. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. On Wednesday, there are no important events or reports scheduled in the UK, while the US will release the JOLTS report on job openings.   The market will only react to this report if the actual value significantly deviates from the forecast. Basic rules of the trading system: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.     2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.     3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.     4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.     5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.   6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.   Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.    
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GBP/USD Continues its Upside Momentum, Targeting 1.2670

InstaForex Analysis InstaForex Analysis 02.06.2023 10:22
GBP/USD has been trading upside as I expected. The momentum is still strong to the upside and there is the chance for the higher prices towards upside reference. Due to the mid-long term upside trend and the short-term upside momentum, I see potential for the further growth towards the upside reference. Upisde objective is set at the price of 1.2670 MACD oscillator is showing bull reading, which is good sign for the upside continuation.   Key support is set at the price of 1.2310    
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Bulls Retrace GBP/USD Pair Amidst Bearish Pressure: Technical Market Outlook

InstaForex Analysis InstaForex Analysis 02.06.2023 10:41
Technical Market Outlook: The GBP/USD pair had made the last swing low at the level of 1.2308 as the market is still under the bearish pressure, but the bulls have managed to retrace 61% of the last wave down and hit the level of 1.2540. The market is trading above the 50 and 100 MA already.   The intraday technical support is located at 1.2517. The momentum is strong and positive on the H4 time frame chart, which supports the bullish short-term outlook for GBP, however the extremely overbought market conditions had been hit, so the pull-back might occur any time soon.     Weekly Pivot Points: WR3 - 1.23581 WR2 - 1.23505 WR1 - 1.23473 Weekly Pivot - 1.23429 WS1 - 1.23397 WS2 - 1.23353 WS3 - 1.23277   Trading Outlook: A Bearish Engulfing candlestick pattern on the Weekly time frame chart 100 pips away from the 61% Fibonacci retracement located at the level of 1.2778 might indicate the corrective cycle to the upside had been terminated. Any sustained breakout below the technical support at 1.2444 will be the first indication of stronger bearish pressure.
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GBP/USD Surges Unexpectedly: Examining the Market Movement and Anticipating Nonfarm Payrolls Impact

InstaForex Analysis InstaForex Analysis 02.06.2023 10:47
On Thursday, the GBP/USD pair grew "out of nowhere" again. And it was an impressive one at that. Take note that there was no significant news from the UK this week. If, for example, the Bank of England had made hawkish statements, the movement would have been understandable.   However, all the data that influenced the market came from overseas, and many of them favored the dollar. The situation with the euro is slightly different, which explains its growth. After all, yesterday and the daybefore that, several important reports were released in the EU, two speeches by European Central Bank President Christine Lagarde took place, and the ECB minutes were published. But it is very difficult to say why the pound is rising again.       However, we did experience a good intraday trending movement yesterday, which made the trading signals strong and profitable. Initially, the pair consolidated below the range of 1.2429-1.2445 and managed to move down by about 20 pips, allowing for setting a stop loss at breakeven and leaving the trade without losses when the pair consolidated above the mentioned range. Based on the buy signal, long positions should have been opened, and the price subsequently surpassed the nearest target level of 1.2520.   The trade should have been manually closed in the evening, resulting in a profit of about 75 pips, which is quite good. But let's reiterate: it is convenient to trade when there is a strong and trend-driven movement. It is necessary to avoid flat markets.     According to the latest report, non-commercial traders closed 8,100 long positions and 7,100 short ones. The net position dropped by 1,000 but remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run has begun. COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   Both major pairs are in correlation now. At the same time, the positive net position on EUR/USD shows the end of the uptrend. Meanwhile, the net position on GBP/USD is neutral. The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 57,600 sell positions and 69,200 long ones. We do not see the pair extending growth in the long term.     In the 1-hour time frame, the pair has started an upward movement, surpassing all the lines of the Ichimoku indicator. The pound doesn't exactly have grounds to buy the pound, which remains heavily overbought. However, take note that the market has the right to trade regardless of the fundamental and macroeconomic backdrop. The only thing I can say is that the movement doesn't correspond to the nature of the reports and news.   On June 2, trading levels are seen at 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762. Senkou Span B (1.2550) and Kijun-sen (1.2375) lines may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals.   There are also support and resistance which can be used for locking in profits. Today, the event calendar is empty in the UK.   On the other hand, the United States will release its highly anticipated Nonfarm Payrolls and unemployment reports. We have no doubt that the market will react to them, and the reaction could be practically anything - it is currently impossible to predict the values of the reports. Indicators on charts:   Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  
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Trading GBP/USD: Analysis, Tips, and Price Levels

InstaForex Analysis InstaForex Analysis 02.06.2023 11:02
Analysis of transactions and tips for trading GBP/USD he price test of 1.2480, coinciding with the significant rise of the MACD line from zero, limited the upward potential of the pair. Even so, market players continued to buy, ignoring weak manufacturing activity data in the UK.     The empty economic calendar today will convince traders to push GBP/USD higher, which could continue in the afternoon if the upcoming US labor market data show growth in the unemployment rate and a weaker increase in non-farm payrolls. Such a scenario will convince the Fed to continue its tight approach to monetary policy. Lately, the central bank expressed plans to pause its rate hike cycle. If this happens, dollar demand will decline, which will lead to a rise in the pair.   For long positions: Buy when pound hits 1.2544 (green line on the chart) and take profit at the price of 1.2592 (thicker green line on the chart). Growth could occur. However, when buying, traders should make sure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2517, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2544 and 1.2592.   For short positions: Sell when pound reaches 1.2517 (red line on the chart) and take profit at the price of 1.2477. Pressure could continue amid very strong labor market data from the US. However, when selling, traders should make sure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2544, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2517 and 1.2477.       What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market   Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.  
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GBP/USD Trading Analysis: Entry Signals, Key Levels, and Commitments of Traders

InstaForex Analysis InstaForex Analysis 02.06.2023 11:08
Yesterday, several entry signals were made. Let's look at the 5-minute chart to get a picture of what happened. I considered entering the market from the level of 1.2414. A fall and a false breakout generated a buy signal. The price rose by more than 50 pips. In the American session, the pair dropped after the publication of US labor market data, but the bulls still protected 1.2449. After another buy signal, the pair advanced by 65 pips. Short positions at 1.251 brought no desired result.     When to open long positions on GBP/USD In the UK, the manufacturing PMI kept contracting in May although at a slower pace than in April. The pair barely reacted to those results. At the same time, the ISM manufacturing PMI in the US triggered a mass sell-off of the greenback and boosted the pound. Today, GBP/USD will still be in demand. In the American session, data on the US labor market will be in focus. Therefore, buying at current highs will hardly be a good idea. Rather, positions should be opened when a bearish correction occurs.   If the bulls protect 1.2475 support and a false breakout follows, a buy signal will be generated with the target at 1.2543 resistance. An additional buy signal targeting 1.2576 will come after a breakout and consolidation above the mark on disappointing macro data in the US. The most distant target stands at 1.2607 where I will lock in profit. If the price goes toward 1.2506 and there is no bullish activity there, pressure on the pound will increase, and the bears will get a chance to stop yesterday's growth. In such a case, a sell signal will come after protecting 1.2475 and a false breakout. I will buy GBP/USD on a bounce from 1.2449, allowing a correction of 30-35 pips intraday.   When to open short positions on GBP/USD: After triggering a row of bearish Stop Losses yesterday, the bulls will likely build a new uptrend today. That is why bearish activity may only increase near 1.2543 resistance and after a false consolidation above this range. This will generate a sell signal and trigger a small correction to 1.2506 support. A breakout and an upside retest of this range will occur only if US macro data comes upbeat. GBP/USD will face pressure, producing a sell signal targeting 1.2475. The most distant target is still seen at a low of 1.2449 where I will lock in profits.   If GBP/USD goes up and there is no activity at 1.2543, the bull market will continue. I will open short positions after a test of 1.2576 resistance. A false breakout will create a sell entry point. If there is no bearish activity there either, I will sell GBP/USD on a bounce from a high of 1.2607, allowing a bearish correction of 30-35 pips intraday.     Commitments of Traders: The COT report for May 23 shows a decrease in both long and short positions. Last week, the pound was bearish. However, with a drop in both longs and shorts, a shift in trading powers seems minimal. Traders had to close positions fearing the US debt ceiling deal would not be reached. Moreover, recession risks were still weighing on them. They were also concerned about the Bank of England's monetary policy stance. The regulator said it might pause tightening although inflationary pressures in the UK were still high. According to the latest COT report, short non-commercial positions dropped by 7,181 to 57,614, and long non-commercial positions decreased by 8,185 to 69,203. The non-commercial net position fell to 11,059 from 12,593 a week earlier. The weekly price dropped to 1.2425 from 1.2495.       Indicators' signals: Moving averages: Trading is carried out above the 30-day and 50-day moving averages, which indicates a bullish continuation.     Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart. Bollinger Bands Support stands at 1.2475, in line with the lower band. Indicators: Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart. Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart. Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9. Bollinger Bands. Period 20 Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements. Long non-commercial positions are the total long position of non-commercial traders. Non-commercial short positions are the total short position of non-commercial traders. Total non-commercial net position is the difference between the short and long positions of non-commercial traders.  
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Unexplained Surge of GBP/USD: Market Confusion and Fundamental Disconnect

InstaForex Analysis InstaForex Analysis 02.06.2023 11:17
The GBP/USD currency pair calmly continued its upward movement on Thursday. And we are forced to state that the rise of the British currency is once again completely illogical. The market is returning to its favorite activity of the past few months - buying the pound regardless of its fundamental background. And if that's the case, we can do nothing about it. It is worth noting that at the same time, the euro continues to trade below the moving average and shows no signs of growth.   At most, a correction may occur soon due to the CCI indicator entering the oversold area. In other words, the pound and the euro do not correlate this week, which always raises questions. The fundamental background has indeed been very different for these pairs. We have received diverse news, statements, speeches, and reports from the European Union. The market has not yet figured out which of this data is primary and which can be disregarded.       However, at the same time, from the UK, we have only received the report on business activity in the manufacturing sector for May in its final assessment. This secondary indicator could not have caused a strong British currency rise yesterday. What could be the problem? We can only assume one thing. The market believes that the ECB is approaching the end of its tightening cycle. Still, at the same time, it expects several more rate hikes from the Bank of England, which puts the British pound in a more favorable position than the dollar or the euro.   It is worth noting that the probability of an interest rate hike by the Federal Reserve in June has sharply increased this week, as several members of the monetary committee have expressed their readiness to support a "hawkish" decision without pausing. But yesterday, Thomas Jefferson and Patrick Harker, on the contrary, spoke in favor of a pause, which further confused traders. If the market is confused, seeing flat or cautious movements would be more logical. However, the pound is rising again like yeast. Therefore, the issue lies in the CCI indicator entering the oversold area and maintaining a bullish sentiment in the market. The pound should resume its decline, but strong bearish signals are now needed, which are currently lacking.   Nonfarm payrolls and unemployment can pleasantly surprise the market. On the last trading day of the week in the United States, the publication of the nonfarm payroll reports is scheduled. Since the British pound is rising again for unclear reasons, these reports are intended to set everything straight. The dollar may resume growth if they show good values (not below forecasts).   If the values are weak, the pound may rise even stronger in joy. And it doesn't matter that globally, it should decline by another 500-600 points to contemplate new growth. It is worth noting that we did not receive any "hawkish" signals from the United States this week. And if so, there are no strong reasons for the pound to rise.   On Thursday, the ADP report on changes in the number of private sector employees in the United States showed a higher value than expected - 278,000 against the forecast of 170-200. However, this report is rarely perceived by traders as important. They usually prefer to wait for the Nonfarm Payrolls. Moreover, the nature of the ADP and NonFarm reports rarely coincides. Thus, today's NonFarm report may be weaker than the forecasts (180-190 thousand), and the bulls will have a new legitimate opportunity to buy the pound and sell the dollar.   Therefore, the week may end unexpectedly. The fact that the euro and the pound are already trading in different directions causes surprise, but the current week shows that there have been and will be surprised. Volatility has started to rise again, but at the same time, frequent corrections and pullbacks occur. It is worth noting that there are better types of movement for trading in the 4-hour timeframe.     The average volatility of the GBP/USD pair over the past five trading days is 92 pips. For the pound/dollar pair, this value is considered "average." Therefore, on Friday, June 2nd, we expect movement within the channel bounded by the levels of 1.2424 and 1.2608. A downward reversal of the Heiken Ashi indicator will signal a correction against the recent upward trend.   Nearest support levels: S1 - 1.2482 S2 - 1.2451 S3 - 1.2421   Nearest resistance levels: R1 - 1.2512   Trading recommendations: On the 4-hour timeframe, the GBP/USD pair has settled above the moving average line, so long positions with a target of 1.2608 are currently relevant, which should be held until the Heiken Ashi indicator reverses downwards. Short positions can be considered if the price consolidates below the moving average with targets at 1.2360 and 1.2329.   Explanation of illustrations: Linear regression channels - help determine the current trend. If both channels are directed in the same direction, it indicates a strong trend. Moving average line (settings 20.0, smoothed) - determines the short-term trend and direction for trading. Murray levels - target levels for movements and corrections. Volatility levels (red lines) - the probable price channel in which the pair will move the next day, based on current volatility indicators. CCI indicator - its entry into the oversold region (below -250) or overbought region (above +250) indicates an upcoming trend reversal in the opposite direction.    
GBP/USD: Pound Falls on Debt Ceiling News, Targets Key Support Levels

GBP/USD Forecast: Pound Faces Potential Reversal as Marlin Oscillator Signals Downward Turn

InstaForex Analysis InstaForex Analysis 31.05.2023 08:50
GBP/USD Yesterday, the British pound grew (by 0.47% compared to a 0.20% decline in the dollar index) and its upper shadow managed to reach the target level of 1.2443. As the signal line of the Marlin oscillator has already approached the boundary of the growth area, it may start to reverse downwards in the direction of the main trend.   If the reversal occurs and the price establishes itself below the MACD line (1.2400), the first target will be 1.2273 (the April 3 low and the high of February 14). If the price stays above 1.2443, it can rise towards 1.2583. However, the pound may not reach this level, and a reversal could occur from any intermediate resistance.       On the 4-hour chart, the price has settled above the balance and MACD indicator lines, and the Marlin oscillator has shown slight growth in the growth area but is now showing initial signs of a downward reversal.   Since the MACD line is located below the 1.2400 level, overcoming the support level (1.2365) will serve as the final condition for the price to reverse into a medium-term decline.  
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GBP/USD Technical Analysis: Bearish Pressure Persists as Pound Eyes 1.2329 Level

InstaForex Analysis InstaForex Analysis 05.06.2023 09:17
Early in the European session, the British pound is trading around 1.2443 below the 21 SMA and the 200 EMA. The 1-hour chart shows that the British pound reached the 1.2542 level and failed to consolidate above that level. We see a strong technical correction today, and the instrument is likely to continue falling towards the 5/8 Murray level over the next few days around 1.2329.   GBP/USD pair fell more than 100 pips in light of the solid data from the US labor market to a daily low of 1.2426 reached today in the European session. The upbeat US data indicates a possible reconsideration of further interest rate hikes by the Federal Reserve. So, GBP/USD will be under bearish pressure in the short term and could reach the psychological level of 1.20.   In the chart above, we can see that the British pound broke the downtrend channel but left a gap at about 1.24494. In the next few hours, GBP/USD could rebound and cover this gap. It could reach 1.2451 (6/8 Murray) and the 21 SMA around 1.2476. In case the British pound falls below 1.2420, it is expected to extend its decline.       Hence, GBP/USD could reach 5/8 Murray at 1.2329. The eagle indicator is giving a negative signal. Therefore, any technical bounce below the psychological level of 1.25 will be considered an opportunity to sell.   On the other hand, a pullback towards the SMA 21 located at 1.2476 or towards 1.2480 could be seen as a signal to sell, since the daily pivot point is located there. This serves as a signal that the pound could continue falling in the next few days.
GBP/USD: Pound Falls on Debt Ceiling News, Targets Key Support Levels

GBP/USD: Pound Falls on Debt Ceiling News, Targets Key Support Levels

InstaForex Analysis InstaForex Analysis 05.06.2023 09:21
GBP/USD: On Friday, the pound fell by 75 pips amid mixed but not exactly weak US employment data. This morning, upon the news of President Biden signing a bill to lift the debt ceiling on Saturday, the pound lost another 20 pips, entering the range of the May 31 candle.     The nearest target at 1.2403, the MACD daily line, is now open. Breaking below this line opens up the target of 1.2273, which is both the April 3 low and the February 14 high. The Marlin oscillator is moving deeper into the downtrend area, and it may reach the oversold zone when the price approaches the target range of 1.2125/53.       On the four-hour chart, the price is moving between two target levels while the Marlin oscillator remains negative. It is likely that the price will attempt to break 1.2403. If successful, the pound will aim for the MACD line on the four-hour chart around 1.2370. Breaking below this support, the British pound will be aiming for 1.2273.  
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GBP/USD: Pound Faces Resistance as MACD and Marlin Oscillator Influence Trading

InstaForex Analysis InstaForex Analysis 06.06.2023 08:12
GBP/USD: Yesterday, the British pound tried to fall below the MACD line on the daily chart but was pushed back up towards the resistance level at 1.2443. The signal line of the Marlin oscillator is moving up along with the price but is providing noticeable resistance to this movement.     A consolidation above 1.2443 with the oscillator transitioning into positive territory can potentially lead the price to the target level of 1.2583. At the moment, a new level has formed at yesterday's low of 1.2367 (coinciding with the April 21 low, where there was also a sharp rebound). Falling below this level will open up the target of 1.2273. The bearish scenario persists     On the four-hour chart, the price has bounced off the support of the MACD indicator line. Currently, the price is consolidating near the level of 1.2443.   The Marlin oscillator is in the downtrend area. Here, the earliest bearish signal is also the support level at 1.2367, reinforced by the MACD line. We await further developments.          
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GBP/USD: Mixed Signals and Uncertainty Amid Volatile Trading

InstaForex Analysis InstaForex Analysis 06.06.2023 08:22
The GBP/USD pair traded lower for most of Monday, clearly indicating a desire to resume its downtrend. However, the ISM non-manufacturing business activity index in the US spoiled the bearish sentiment. It's worth noting that the volatility today reached 84 pips, nearly double that of the euro.     Therefore, trading the pound was possible today, and we will discuss the signals in more detail below. For now, it should be noted that the downward trend has been broken as the pair recently surpassed two descending trendlines. From a technical perspective, a short-term rise is possible, but from the same technical standpoint, a decline should be expected in the medium term. The current situation is not entirely clear, and the fundamental and macroeconomic backdrop this week is unlikely to assist traders.       There were some trading signals on the 5-minute chart, although they weren't great. The first sell signal was formed overnight, but by the opening of the European session, the pair was at the point of formation. Therefore, a sell trade could confidently be opened.   Later, the price dropped to the level of 1.2386 and bounced off it. It was appropriate to close the shorts (with a profit of about 25 pips) and open long positions. The buy signal turned out to be false, as did the subsequent sell signal. These two signals "ate up" all the profit from the first trade and also forced us to remove the level of 1.2386 and replace it with 1.2372. It was not advisable to trade the last signal around 1.2372 as the first two proved to be false.   Trading tips on Tuesday: As seen on the 30M chart, the GBP/USD pair has ended its downtrend and started a new uptrend in the short-term. We believe that the pound has not fallen enough to form a new strong uptrend, but the market may have a different opinion. There are a couple of important data scheduled for release this week, so we recommend analyzing higher charts to understand the potential direction of the price.   The key levels on the 5M chart are .2171-1.2179, 1.2245, 1.2307, 1.2372, 1.2445, 1.2507-1.2520, 1.2597-1.2616, 1.2659, 1.2697. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. The UK will release its Construction PMI on Tuesday, which could potentially provoke a market reaction. However, the chances of that are still low. The economic calendar is empty in the US.   Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.    
GBP/USD: Bearish Outlook Prevails Amidst Lack of Fundamental Drivers

GBP/USD: Bearish Outlook Prevails Amidst Lack of Fundamental Drivers

InstaForex Analysis InstaForex Analysis 07.06.2023 09:36
The GBP/USD currency pair failed to continue its upward movement for the third consecutive time on Tuesday after consolidating above the moving average line. It is worth noting that last week the pair showed significant growth, but there were hardly any solid reasons behind such a movement. Just looking at the calendar of fundamental events and the movements of the EUR/USD pair during the same period confirms this.   Currently, the pound is trying to figure out its next move. It remains close to its local peaks, which are too high for its current conditions. Remember that there are no substantial reasons for it to be that high. One of the reasons for the pound's strong rally in recent weeks could have been the oversold condition of the CCI indicator on May 11.     But it has already been accounted for and worked out in this case. It's time to head down again. There were no important publications or events in the UK or the US on Tuesday. Overall, this week will have a limited number of important events and news.     Therefore, the pair may continue to swing sideways. However, in the medium term, we expect it to decline in almost any case. Whether it will happen remains an open question because the market has shown us in recent months that it can buy when 80% of the factors suggest selling. In the 24-hour timeframe, the price rebounded from a critical line, and this signal is the main hope for a decline soon.     The Kijun-sen line is strong, so a decline can be expected after the rebound. Additionally, there won't be any significant reports or events soon to shift the market sentiment to "bullish" again suddenly. No matter how you look at it, the word "decline" is evident everywhere. There is no fundamental background, only sell signals. Regarding the fundamental background, there is nothing new to say after Tuesday.     There weren't even any minor speeches from the Bank of England or Fed officials. The next Federal Reserve meeting will occur on June 13-14, so the "quiet period" has already begun. This means there will be no speeches by Fed representatives until the meeting.   The same applies to BoE members. The topic of US government debt is closed. There is no news. Therefore, the pair may trade chaotically and flatly or swing back and forth over the next few weeks. Be prepared for any outcome. By the way, the CCI indicator almost entered the overbought zone again. If that had happened, the probability of a new decline would have increased significantly. Without that, we can only wait for a decline and be wary of another illogical rally.       We have already discussed the Fed rates in the article on EUR/USD; there is nothing new about the Bank of England's rates. It will undoubtedly increase by 0.25% at the next meeting, the thirteenth consecutive hike. Inflation in the UK remains high, and there is no guarantee it will slow down at the same pace as in April. Thus, the British regulator cannot ease its monetary pressure, but at the same time, the rate has already risen to 4.5%. This is not the maximum possible value. The rate could increase by another 0.25-0.5%, but GDP has remained near zero growth for three consecutive quarters. According to Andrew Bailey, each subsequent rate hike could harm the British economy, which will not enter a recession this year.   But it's uncertain. Let's mention the "head and shoulders" pattern forming between May 30 and June 6. If it is indeed forming, it provides another sell signal. Two shoulders are around the level of 1.2451. The head is around the level of 1.2543. The average volatility of the GBP/USD pair over the past five trading days is 98 pips. For the pound/dollar pair, this value is considered "average."   Therefore, on Wednesday, June 7, we expect movements between 1.2322 and 1.2518. Reversal of the Heiken Ashi indicator back upward will signal a new upward movement phase.     Nearest support levels: S1 - 1.2421 S2 - 1.2390 S3 - 1.2360   Nearest resistance levels: R1 - 1.2451 R2 - 1.2482 R3 - 1.2512   Trading recommendations: On the 4-hour timeframe, the GBP/USD pair has settled below the moving average line, so short positions are currently relevant, with targets at 1.2360 and 1.2329. These positions should be held until the Heiken Ashi indicator reverses upward. Long positions can be considered if the price consolidates above the moving average line with targets at 1.2482 and 1.2512.   Explanations for the illustrations: Linear regression channels - help determine the current trend. The trend is strong if both channels are directed in the same direction. Moving average line (settings 20,0, smoothed) - determines the short-term trend and the direction in which trading should be conducted.   Murray levels - target levels for movements and corrections. Volatility levels (red lines) - the probable price channel in which the pair will move the next day based on current volatility indicators. CCI indicator - its entry into the oversold area (below -250) or overbought area (above +250) indicates an upcoming trend reversal in the opposite direction.  
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GBP/USD Forecast: Potential Downward Movement Ahead

InstaForex Analysis InstaForex Analysis 07.06.2023 09:41
The market may move downward from the level of 1.2420 (closing of yesterday's daily candle) to 1.2387, the 61.8% pullback level (blue dotted line). In the case of testing this level, the price may move upward with the target of 1.2448, the 38.2% pullback level (red dotted line).     Comprehensive analysis: Indicator analysis - down; Fibonacci levels - down; Volumes - down; Candlestick analysis - down; Trend analysis - down; Weekly chart - down; Bollinger bands - down.     General conclusion: Today, the price may move downward from the level of 1.2420 (closing of yesterday's daily candle) to 1.2387, the 61.8% pullback level (blue dotted line). In the case of testing this level, the price may move upward with the target of 1.2448, the 38.2% pullback level (red dotted line). Alternatively, the price may move downward from the level of 1.2420 (closing of yesterday's daily candle) to 1.2362, the 76.4% pullback level (blue dotted line). In the case of testing this level, an upward movement is possible with the target of 1.2448, the 38.2% pullback level (red dotted line).    
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GBP/USD Analysis: Volatility, Technical Signals, and COT Report Insights for Traders

InstaForex Analysis InstaForex Analysis 07.06.2023 09:52
GBP/USD also traded lower on Tuesday, and if you look at the events calendar you would see that the pair had no reason to fall. However, as we have mentioned before, just because the events calendar is empty, it does not mean that the pair will simply stay still. The pound's decline was and remains the most likely scenario, so a 50-60 point decline is not out of the ordinary.   The only report of the day, the UK Construction PMI, turned out to be slightly better than forecasts but, as we can see, had no impact on the pair's movement. On the technical side, however, the pair performed quite well, staying precisely between the Senkou Span B and the Kijun-sen lines. The signals for the pound were almost identical to the signals for the euro, with the only difference being that at the beginning of the European trading session, the pair managed to form a false buy signal by consolidating above a critical line.   This signal resulted in a small loss, but was followed by a good sell signal near the same Kijun-sen line, after which the pair fell to the Senkou Span B line. It was appropriate to close shorts near this line so you could gain around 35 pips of profit. Bouncing off the lower boundary of the Ichimoku cloud was also a good signal, and a long position allowed traders to gain about 20 pips. Thus, despite the initial losing trade, the day ended with a profit. Due to the low volatility, the profit was also relatively small.     COT report: According to the latest report, non-commercial traders opened 1,100 long positions and closed 500 short ones. The net position increased by 600 and remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run has begun. COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   Both major pairs are in correlation now. At the same time, the positive net position on EUR/USD shows the end of the uptrend. Meanwhile, the net position on GBP/USD is neutral. The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 57,000 sell positions and 70,300 long ones. We do not see the pair extending growth in the long term. x
Navigating GBP/USD: Analysis, Levels, and Indicators

Navigating GBP/USD: Analysis, Levels, and Indicators

InstaForex Analysis InstaForex Analysis 07.06.2023 09:55
1H chart of GBP/USD In the 1-hour time frame, the pair started an upward movement and just as quickly ended it. The market insists on buying the pound, which remains significantly overbought and unjustifiably high. However, take note that the market has the right to trade regardless of the fundamental and macroeconomic backdrop. For now, we will consider the strong correction that we've seen last week and expect a revival of the downward movement.   On June 7, trading levels are seen at 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762. The Senkou Span B line (1.2395) and the Kijun-sen line (1.2455) lines may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits. On Wednesday, there are no important events scheduled in either the UK or the US. Therefore, there will be no specific events to react to during the day, and volatility could be low again, and we can't expect trend-driven movements either.     Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  
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GBP: Steady Sterling Awaits Jobs Data Amidst Narrow Trading Range

ING Economics ING Economics 09.06.2023 08:43
GBP: Sterling steady into jobs data next Tuesday EUR/GBP volatility remains near recent lows and spot trades well within a tight 0.8570-0.8640 range. Second or third-tier UK data has been quite mixed recently, but the main event on the data front will be next Tuesday's release of jobs and wages data. We see that as a negative event risk for sterling, where wage growth could continue to slow and take some of the steam out of the 100bp+ Bank of England tightening expectations still priced in by money markets. GBP/USD to trade well within a 1.2400-1.2500 range.  
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UK Jobs Market Heats Up: Low Chance of BOE Rate Cuts Amidst Strong Wage Inflation User

ING Economics ING Economics 13.06.2023 13:15
GBP: UK jobs markets stays hot Data out of the UK this morning point to ultra-tight conditions in the jobs market, as unemployment unexpectedly fell again to 3.8% and average weekly earnings jumped from 5.8% to 6.5%. Our UK economist discusses in this article why sticky UK wage inflation means very low chances of Bank of England rate cuts before 2024. We are less convinced this will lead to several more rate hikes by the BoE: markets are currently pricing in 100bp of tightening to the peak, but we struggle to see more than two 25bp increases (in June and August). We keep highlighting the risks for sterling of a dovish repricing in the BoE rate expectations down the road, but with data pointing consistently to more tightening recently, it’s hard to buck the bullish GBP trend in the near term. Still, GBP/USD may well default to being driven by the dollar leg as soon as the US CPI risk event kicks in.
GBP/USD Trading Plan: Bulls Eyeing Further Growth, Resistance Level Holds Key, COT Report Signals Interest Rate Expectations

GBP/USD Trading Plan: Bulls Eyeing Further Growth, Resistance Level Holds Key, COT Report Signals Interest Rate Expectations

InstaForex Analysis InstaForex Analysis 13.06.2023 14:11
Forex Analysis & Reviews: GBP/USD: trading plan for the US session on June 13 (analysis of morning deals). The pound climbed above 1.2553. In my morning forecast, I highlighted the level of 1.2553 and recommended making trading decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The breakout and subsequent retest from above to below 1.2553 provided a buy signal, resulting in an upward movement of 18 pips. The technical picture has stayed the same for the second half of the day.       To open long positions on GBP/USD, the following conditions are required: As long as trading continues above 1.2553, further growth in GBP/USD can be expected. Buyers will particularly show themselves after news of a decrease in inflation in the US, leading to a surge in the pound to monthly highs of around 1.2596. Having another entry point around 1.2553 would be desirable, so protecting this level remains a priority task for the bulls. A breakout and retest from above to below 1.2596, similar to what I discussed earlier, will provide an additional signal to open long positions, strengthening the presence of bulls with a movement towards 1.2636, reinforcing the upward trend.   The ultimate target will be the area of 1.2674, where I will take profit. In the scenario of a pound decline towards 1.2553 and a lack of activity from buyers, pressure on the pair will return. The persistence of high inflation in the US will also limit the upside potential of the pair. In that case, I will postpone market entry until the support at 1.2516 is reached. I will only open long positions there on a false breakout.   I plan to buy GBP/USD on a rebound from 1.2479, targeting a 30-35 pip correction within the day. To open short positions on GBP/USD, the following conditions are required: Sellers were unable to show anything after the news that the unemployment rate in the UK dropped to a record 3.8%, which puts pressure on the Bank of England to continue raising rates. All hope now lies with strong inflation in the US, which will help defend 1.2596.   I will only open short positions after GBP/USD rises to monthly highs, forming a false breakout. This will allow a downward move towards support at 1.2553, which acted as resistance earlier in the morning. A breakout and retest from below to above this range will restore the chances of a downward correction and provide a signal to open short positions with a decline toward 1.2516. The ultimate target remains the minimum of 1.2479, where I will take profit.   In the case of further growth in GBP/USD and a lack of activity at 1.2596, which seems likely, buyers will continue to dominate. In that case, I will postpone selling until the resistance at 1.2636 is tested. A false breakout there will be an entry point for short positions. I plan to sell GBP/USD on a rebound from the May high of around 1.2674, but only with the expectation of a downward correction of 25-30 pips within the day.     The COT (Commitment of Traders) report for June 6th showed a reduction in both short and long positions. The pound has risen significantly recently. This indicates that many market participants continue to bet on an increase in interest rates by the Bank of England. Recent forecasts and expectations that the UK economy will avoid a recession this year also contribute to the demand for risk assets. We have paused the cycle of interest rate hikes by the Federal Reserve ahead, which will also support GBP/USD buyers.   The latest COT report states that short non-commercial positions decreased by 4,056 to 52,579, while long non-commercial positions fell by 5,257 to 65,063. This led to a slight decrease in the non-commercial net position to 12,454 from 13,235 the previous week. The weekly price rose to 1.2434 from 1.2398.     Indicator signals: Moving averages Trading is conducted above the 30-day and 50-day moving averages, indicating further growth in the pair. Note: The author considers the period and prices of the moving averages on the hourly chart (H1), which differ from the general definition of classical daily moving averages on the daily chart (D1).   Bollinger Bands In case of a decline, the lower boundary of the indicator, around 1.2479, will act as support. Description of Indicators: • Moving Average: Determines the current trend by smoothing volatility and noise. Period 50. Marked in yellow on the chart. • Moving Average: Determines the current trend by smoothing volatility and noise. Period 30. Marked in green on the chart. • MACD Indicator (Moving Average Convergence/Divergence): Fast EMA period 12, Slow EMA period 26, SMA period 9. • Bollinger Bands: Period 20. • Non-commercial traders: Speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting specific requirements. • Long non-commercial positions represent the total long open position of non-commercial traders. • Short non-commercial positions represent the total short open position of non-commercial traders. • The net non-commercial position is the difference between non-commercial traders' short and long positions.      
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Fed Signals Rate Pause as UK GDP Aims for April Rebound

Michael Hewson Michael Hewson 14.06.2023 08:30
Fed set for a rate pause; UK GDP set to rebound in April    European markets closed higher for the second day in a row, after the latest US inflation numbers for May came in at a 2-year low, and speculation about further Chinese stimulus measures boosted sentiment.   US markets followed suit although the enthusiasm and gains were tempered ahead of today's Fed meeting as caution set in ahead of the rate announcement.   Having seen US CPI for May come in at a two year low of 4%, in numbers released yesterday, market expectations are for the US central bank to take a pause today with a view to looking at a hike in July. Of course, this will be predicated on how the economic data plays out over the next 6-7 weeks but nonetheless the idea that you would commit to a hike in July begs the question why not hike now and keep your options open regarding July, ensuring that financial conditions don't loosen too much.   Today's May PPI numbers are only likely to reinforce this more dovish tilt, if as expected we see further evidence of slowing prices, with core prices set to fall below 3% for the first time in over 3 years. Headline PPI is expected to slow to 1.5%, down from 2.3%.       When Fed officials set out the "skip" mindset in their numerous briefings since the May decision when the decision was taken to remove the line that signalled more rate hikes were coming, there was always a risk that this sort of pre-commitment might turn out to be problematic.   So, while markets are fully expecting the Fed to announce no change today, Powell's biggest challenge will be in keeping the prospect of a July rate hike a credible outcome, while at the same time as outlining the Fed's economic projections for the rest of the year, as well as for 2024.   In their previous projections they expect unemployment to rise to a median target of 4.5% by the end of this year. Is that even remotely credible now given we are currently at 3.7%, while its core PCE inflation target is 3.6%, and median GDP is at 0.4%.     Before we get to the Fed meeting the focus shifts back to the UK economy after yesterday's unexpectedly solid April jobs data, as well as the sharp surge in wages growth, which prompted UK 2-year gilt yields to surge to their highest levels since 2008, up almost 25bps on the day.   While unemployment slipped back to 3.8% as more people returned to the work force, wage growth also rose sharply to 7.2%, showing once again the resilience of the UK labour market, and once again underlining the policy failures of the Bank of England in looking to contain an inflation genie that has got away from them.   This failure now has markets pricing in the prospect that we could see bank rate as high as 6% in the coming months, from its current 4.5%. The risk is now the Bank of England, stung by the fierce and deserved criticism coming its way, will now overreact at a time when inflation could well start to come down sharply in the second half of this year.   So far this year the UK economy has held up reasonably well, defying the doomsters that were predicting a 2-year recession at the end of last year. As things stand, we aren't there yet, unlike Germany and the EU who are both in technical recessions.   Sharp falls in energy prices have helped in this regard, and economic activity has held up well, with PMI activity showing a lot of resilience, however the biggest test is set to come given that most mortgage holders have been on fixed rates these past two years which are about to roll off.     As we look to today's UK April GDP numbers, we've just come off a March contraction of -0.3% which acted as a drag on Q1's 0.1% expansion. The reason for the poor performance in March was due to various public sector strike action from healthcare and transport, which weighed heavily on the services sector which saw a contraction of -0.5%.     The performance would have been worse but for a significant rebound in construction and manufacturing activity which saw strong rebounds of 0.7%.     This isn't expected to be repeated in today's April numbers, however there was still widespread strike action which is likely to have impacted on public services output.   The strong performance from manufacturing is also unlikely to be repeated with some modest declines, however services should rebound to the tune of 0.3%, although the poor March number is likely to drag the rolling 3M/3M reading down from 0.1% to -0.1%.       EUR/USD – failed at the main resistance at the 1.0820/30 area, which needs to break to kick on higher towards 1.0920. We still have support back at the recent lows at 1.0635.     GBP/USD – finding resistance at trend line resistance from the 2021 highs currently at 1.2630. This, along with the May highs at 1.2680 is a key barrier for a move towards the 1.3000 area. We have support at 1.2450.      EUR/GBP – has slipped back from the 0.8615 area yesterday, however while above the 0.8540 10-month lows, the key day reversal scenario just about remains intact. A break below 0.8530 targets a move towards 0. 8350.     USD/JPY – looks set to retest the recent highs at 140.95, with the potential to move up towards 142.50.  Upside remains intact while above 138.30.      FTSE100 is expected to open 10 points lower at 7,585     DAX is expected to open 15 points lower at 16,215     CAC40 is expected to open 3 points lower at 7,288
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Fed's Hawkish Pause and Focus Shifts to ECB: Market Reactions and Outlook

Michael Hewson Michael Hewson 15.06.2023 08:48
As Fed delivers a "hawkish" pause, attention turns to the ECB  European markets closed the day higher yesterday, with the DAX making a new record high, ahead of last night's Fed decision, while US markets closed the session mixed after a choppy session, which saw the Fed deliver a hawkish pause to their rating hiking cycle.     Asia markets were mixed with the latest Chinese retail sales data for May coming in below expectations, rising by 12.7%, along with industrial production which gained 3.5%. The last few weeks have delivered plenty of evidence that headline inflation is slowing sharply, and while core prices are probably stickier than the Fed would like, the direction of travel with respect to PPI suggests that in a couple of months we could be looking at a very different outlook.   Having indicated that they would be looking to hike in July, after removing the line that signalled more rate hikes were coming at the May meeting, there was always a risk that this sort of pre-commitment might turn out to be problematic. So, it has proved, with many suggesting that they would be better off hiking today, and then playing a game of wait and see.   In any case with the Federal Reserve unwilling to step back from its commitment to a pause this month, and delivering on an expectation to keep rates unchanged, they compensated for that by raising their expectation this year for at least 2 more rate hikes, putting the terminal rate at 5.6%, with 12 Fed officials, projecting such a move.    This unexpected hawkish shift saw US 2-year yields spike sharply as the market priced out the prospect of rate cuts later this year, which was never likely anyway, however we also saw the US central bank change their forecasts for unemployment to rise to 4.1% by the end of this year, down from 4.6%, while tweaking its PCE forecast to 3.2% from 3.3%.     Unsurprisingly, the US dollar which had been in retreat, rebounded strongly and stock markets dropped back sharply, over concerns that the US central bank could be on the cusp of a policy mistake.  Once Powell started his press conference the initial moves started to unwind and markets attempted to absorb the message from last night's events, and whether the two more hikes guidance, was based on any type of empirical evidence, or merely a mechanism to steer market expectations, and keep last night's decision unanimous.   The tone of Powell's press conference suggests it was the latter While yesterday's post decision reaction shows that markets were caught the wrong side of last night's decision, the bigger test will be in the economic data. If inflation continues to slow and jobs growth remains steady, the question needs to be asked as to whether the Fed will really pull the trigger on more rate hikes? It seems unlikely.     Moving on from last night's decision, attention will now shift towards today's ECB rate decision.   There appears to be little doubt that we will probably see another 25bps rate hike from the European Central Bank at today's rate meeting.   Nonetheless this would be a notable shift from some of the recent narrative that has accompanied recent discussions about the likely rate path for the ECB. The change of emphasis appears to have come about because of recent sharp falls in the headline rate of CPI, as well as evidence that core prices may well have also seen a peak.   In the latest flash CPI numbers for May, headline inflation fell to 6.1%, a sharp fall from the 7% we saw in April, as well as the 9.2% we were seeing at the end of last year. The big concern in recent months has been core prices which hit a record high of 5.7% in March and fell to 5.3% in the most recent numbers released earlier this month. Based on these numbers alone one can understand the ECB's reluctance to stop hiking, however there are already risks emerging that might suggest the ECB could be close to its own pause moment.       These risks are sharp slowdowns in PPI, which tends to act as a leading indicator for future inflation trends with German PPI now in negative territory. The German economy is also in recession, along with the rest of the eurozone, and yet various ECB policymakers are still calling for several more rate rises, including the likes of Joachim Nagel head of the German Bundesbank, due to still high levels of CPI inflation.     This comes across as particularly risky at a time when we are starting to see increasing signs of deflation across the global economy. Whatever the ECB does today, and a hike is priced in, it is what comes next which is very much up for debate, where ECB President Christine Lagarde will need to tread carefully.     Will the hawks on the ECB maintain their hawkish narrative or will see those claws start to get reined in until we get a better idea of the cumulative effect that the current spate of rate hikes has had. Coming so soon after last nights Fed decision we get US retail sales for May and weekly jobless claims.   Retail sales for May are expected to decline by -0.2%, down from 0.4% in April, while weekly jobless claims which spiked up to 261k last week are expected to slip back to 245k.     The last time we spiked above 260k a few weeks ago it was revised away. Will the same thing happen today?   EUR/USD – pushed above the 1.0820/30 area yesterday and closing in on the 50-day SMA at 1.0880, with resistance now at 1.0920. We still have support back at the recent lows at 1.0635.     GBP/USD – broke above trend line resistance from the 2021 highs at 1.2630 and testing above 1.2680 with the next resistance at 1.2760, which is a key barrier for a move towards the 1.3000 area. We have support at 1.2450.      EUR/GBP – still looking soft despite the key day reversal day earlier this week, but still above 0.8540 support. A break below 0.8530 targets a move towards 0.8350. Resistance at 0.8620.     USD/JPY – still trying to move through the 140.30 area with resistance behind that at the recent highs at 140.95.  Upside remains intact while above 138.30.      FTSE100 is expected to open 10 points lower at 7,592     DAX is expected to open 12 points lower at 16,298     CAC40 is expected to open 15 points lower at 7,313  
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Central Banks Diverge: Fed and ECB Take Hawkish Stance, While Bank of Japan Remains Dovish

Michael Hewson Michael Hewson 16.06.2023 09:29
While the Fed and ECB sound hawkish, the BoJ continues to remain dovish    While European markets underwent a rather subdued and negative finish yesterday, US markets continued their recent exuberant run, with the S&P500 and Nasdaq 100 both closing higher for the 6th day in a row. This was a little surprising given that the Federal Reserve and the European Central Bank both delivered very hawkish outcomes in the space of 24 hours of each other, as well as painting very cautious outlooks for growth and inflation over the course of the next 12 months. While the Federal Reserve kept rates unchanged, they upgraded their terminal rate forecast for this year by indicating that they expected to deliver another 2 rate hikes by the end of this year. This was a little surprising even with the fact that the labour market continues to exhibit significant tightness.     This is because a lot of the main inflation indicators, particularly the forward-looking ones, are showing increasing evidence of disinflation. If they are showing these signs now then the signs will be much more evident in the next few weeks, which means that for all the Fed's jawboning today its highly unlikely they will be able to follow through on it.     Quite simply markets aren't buying it with US 2-year yields below the levels they were prior to Wednesday's Fed meeting. In essence the market thinks the Fed is done as far as rate hikes are concerned.     Yesterday's economic data also cast doubt on the Fed's forward guidance for rates this year with US import prices for May plunging by -5.9% year on year, close to levels last seen in April 2020. Export prices on the other hand fell even more sharply, falling to a record low of -10.1%   While the ECB did deliver a rate hike, they also revised upwards their core inflation forecasts for this year from 4.6% to 5.1%, which was quite punchy given that core inflation has already fallen back to 5.3% in this month's flash numbers, down from 5.6% in April, and just below the record high of 5.7% set in March. This core number is expected to be confirmed in data scheduled to be released later this morning.   ECB President Christine Lagarde even went as far as more or less pre-committing to another 25bps rate hike in July, which in turn helped to push European yields sharply higher. They may well be able to deliver on this, however there is room for scepticism when it comes to any rate moves beyond that.   This is because their core inflation expectations for the end of this year come across as way too high. Does anyone at the ECB seriously believe that core prices won't have fallen below 5% from where they are now by the end of this year, when producer price inflation is already slowing sharply. If they do, they need to have another look at their economic models.   This morning the Bank of Japan delivered their own assessment of the outlook for the Japanese economy, with traders and investors increasingly scratching their heads as to why new Bank of Japan governor Kazuo Ueda seems so reluctant to even consider starting to look at paring back their own easy monetary policy, when core CPI is at 4.1% and the highest level since the 1980's. The BoJ seems to be of the opinion that current levels of core inflation aren't sustainable and that prices will fall back towards 3.5%, before accelerating modestly again.      The central bank is due to update its economic forecasts in July, while Governor Ueda is due to speak in a couple of hours' time when he might offer further insights as to why the Bank of Japan is reluctant to alter its policy settings quite yet.   EUR/USD – pushed above the 50-day SMA at 1.0880, as well as pushing through 1.0920/30 opening the prospect for a return to the April highs at 1.1095. We now have support back at the 1.0820/30 break out level.     GBP/USD – broken above previous highs this year at 1.2680 and kicked on above the 1.2760 area which is 61.8% retracement of the 1.4250/1.0344 down move. This puts us on course for a move towards the 1.3000 area. We now have support at 1.2630.      EUR/GBP – continues to hold above the 0.8530/40 area rallying back to the 0.8600 area before slipping back. The key day reversal from earlier this week is just about still valid, however the lack of a rebound is a concern. A break below 0.8530 targets a move towards 0.8350. Resistance at 0.8620.     USD/JPY – pushed up to 141.50 yesterday, before slipping back, with the next resistance at 142.50 which is 61.8% retracement of the 151.95/127.20 down move. Support now comes in at 140.20/30      FTSE100 is expected to open 7 points higher at 7,635     DAX is expected to open 15 points higher at 16,305     CAC40 is expected to open unchanged at 7,290     By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
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GBP/USD Accelerates as US Data Disappoints: Pound Extends Illogical Growth

InstaForex Analysis InstaForex Analysis 16.06.2023 10:41
GBP/USD accelerates on Friday. Yesterday, there were no significant events lined up in the UK, but the US data turned out to be slightly weaker than expected. Reports on unemployment claims and industrial production were worse than traders' expectations, but there were also reports that exceeded forecasts (retail sales).   Therefore, if the US data were not in favor of the dollar, it was not to the extent that it would fall by 140 pips in a day. On the other hand, the European Central Bank held its meeting, the results of which had no relation to the pound. In addition, the market had already expected its results a couple of weeks ago, if not more. And despite all that the pound still rallied, even more strongly than the euro. Thus, the pound extends its illogical growth. The first sell signal near the 1.2659 level turned out to be false. The price could not move in the right direction even by 20 pips, so the short position closed with a small loss at the beginning of the US trading session when a buy signal appeared. Later, the pair confidently rose to the 1.2762 level and surpassed it. No sell signals were formed for the rest of the day, so traders could close their long positions anywhere.     The profit from this trade amounted to at least 100 pips. COT report: According to the latest report, non-commercial traders closed 5,200 long positions and 4,500 short ones. The net position dropped by 700 but remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. In fact, sentiment is now bullish, but it is a pure formality. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run may soon begin even though COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.     The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 52,500 sell positions and 65,000 long ones. We do not see the pair extending growth in the long term. 1H chart of GBP/USD In the 1-hour chart, maintains a bullish bias. The ascending trend line serves as a buy signal but I believe that further growth of the British currency is groundless. The pound sterling has been climbing for too long and downward corrections are short-lived. Judging by the technical indicators, we have an uptrend.   Yet, it is hard to find the reasons which may push it higher. Nevertheless, the market has no logical reason to buy at the moment. On June 16, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B line (1.2472) and the Kijun-sen line (1.2638) may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits. On Friday, there are no important events lined up in the UK, while the US will only release the University of Michigan Consumer Sentiment Index. Since there are no significant events today, we might witness a slight bearish correction. However, the pound can still rise since it doesn't need any logical reason behind it.
Examining the Inflation Outlook: Anticipating a Summer Turnaround and its Impact on Bank of England's Monetary Policy

Examining the Inflation Outlook: Anticipating a Summer Turnaround and its Impact on Bank of England's Monetary Policy

ING Economics ING Economics 16.06.2023 15:49
The inflation story should start to turn over the summer Then there’s the inflation data itself. The dividing line on the committee right now seems between those hawks that are seeing persistent ‘second-round effects’ of higher energy/food prices, and the doves that think headline/core CPI is simply just lagging behind the wider fall in input and product price inflation over recent months (see a speech by BoE’s Dhingra). Elements of both are true. April’s CPI figures were undeniably ugly, though some of the drivers – higher vehicle and alcohol prices, for example – are unlikely to form long-lasting trends. We agree with the doves that food inflation should begin to ease back in line with producer prices, while services inflation (particularly hospitality) should come under less pressure now gas prices are so much lower. The BoE’s own Decision Maker Panel survey of chief financial officers suggests pay and price expectations have also eased noticeably over recent months. If nothing else, hefty base effects should ensure that the headline inflation rate comes down over the summer months and fluctuates around 6%, and to a lesser extent the same is true of the core rate. Barring some further unpleasant and consistent surprises in the services inflation figures over the coming months, we think a 5% peak for Bank Rate seems reasonable. That implies rate hikes on Thursday and again in August.  However, as we discussed in more detail in a separate piece, we think the downtrend in wage growth is going to be slow – even if it has probably peaked. Labour market shortages look at least partly structural, and we suspect wage growth could end the year above 5% (7% currently). While that doesn't necessarily require the Bank to take rates much higher, it does suggest rate cuts are unlikely for at least a year, not least given the mortgage market structure discussed earlier.   Sterling trade-weighted index pushes back to early 2022 highs   Sterling can hold onto gains in the near term Sterling continues to ride high. On a trade-weighted basis, it is returning to levels last seen in early 2022 before Russia's invasion of Ukraine. Barring a surprisingly soft May UK CPI on Wednesday, 21 June, it looks like sterling can largely hang onto those gains if the Bank of England does not push back against very aggressive tightening expectations. Our strong preference has been that sterling will enjoy more upside against the dollar than the euro. Currently, we have a 1.33 end-year forecast for GBP/USD and the near-term bias is for 1.30 given what seems to be bearish momentum building against the dollar. EUR/GBP has been weaker than we had expected. And next week's BoE meeting may be too soon to expect a bullish reversal here. Yet, consistent with our house view that the Bank Rate will not be taken as high as the 5.65% level currently priced by investors for the end of this year, we suspect that EUR/GBP ends the year closer to the 0.88 area, meaning that current EUR/GBP levels should make a good opportunity to hedge sterling receivables for euro-based accounts. 
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Rising Rates and Stock Markets: Finding Comfort in Unconventional Pairings

Michael Hewson Michael Hewson 19.06.2023 09:44
Rising rates and rising stock markets aren't usually a combination that sits comfortably with a lot of investors but that's exactly what we saw last week, with European markets enjoying their best week in over 2 months, while US markets and the S&P500 enjoying its best week since March.     One of the reasons behind this rebound is a belief that Chinese demand may well pick up as the authorities there implement stimulus measures to support their struggling economy.   There is also a belief that despite seeing the Federal Reserve deliver a hawkish pause to its rate hiking cycle and the ECB deliver another 25bps rate hike last week, that we are close to the peak when it comes to rate rises, even though there is a growing acceptance that interest rates aren't coming down any time soon.     We did have one notable outlier from last week and that was the Bank of Japan who left their current policy settings unchanged in the monetary policy equivalent of what could be described as sticking one's fingers in one's ears and shouting loudly, and pretending core inflation isn't already at 40-year highs.   This week, attention turns to the Swiss National Bank, as well as the Bank of England, who are both expected to follow in the ECB's footsteps and hike rates by 25bps.   The UK especially has a big inflation problem, with average wages up by 7.2% for the 3-months to April, the Bank of England, not for the first time, has allowed inflation expectations to get out of control. This was despite many warnings over the last 18-months that they were acting too slowly, even though they were the first central bank to start hiking rates.     We heard over the weekend from former Bank of England governor Mark Carney that this state of affairs wasn't surprising to him, and that Brexit was partly to blame for the UK's high inflation rate and that he was proved correct when he warned of the long-term effects back in 2016.   Aside from the fact that UK inflation is not that much higher than its European peers, Carney's intervention is a helpful reminder of what a poor job he did as Bank of England governor. At the time he warned of an economic apocalypse warning that growth would collapse and unemployment would soar, and yet here we are with a participation rate at near record levels, and an economy that isn't in recession, unlike Germany and the EU, which are.     The reality is that two huge supply shocks have hit the global economy, firstly Covid and then the Russian invasion of Ukraine, and that the UK's reliance on imported energy and lack of gas storage which has served to magnify the shock on the UK economy.   That would have happened with or without Brexit and to pretend otherwise is nonsense on stilts. If anything is to blame it is decades of poor energy policy and economic planning by successive and existing UK governments. UK inflation is also taking longer to come down due to the residual effects of the energy price cap, another misguided, and ultimately costly government policy.   Carney is probably correct about one thing, and that is interest rates are unlikely to come down any time soon, and could stay at current levels for years.   This week is likely to be a big week for the pound, currently at 14-month highs against the US dollar, with markets pricing in the prospect of another 100bps of rate hikes. UK 2-year gilt yields are already above their October peaks and at 15-year highs, although 5- and 10-year yields aren't.     This feels like an overreaction and while many UK mortgage holders are looking at UK rates with trepidation, this comes across as overpriced. It seems highly likely we will get one rate rise this week and perhaps another in August, but beyond another 50bps seems a stretch and would be a surprise.        With some US markets closed for the Juneteenth public holiday, today's European session is likely to be a quiet one, with a modestly negative open after US markets finished the end of a positive week, with their first daily decline in six days.       EUR/USD – pushed up to the 1.0970 area last week having broken above the 50-day SMA at 1.0880. We now look set for a move towards the April highs at the 1.1095 area. Support comes in at the 50-day SMA between the 1.0870/80 area.     GBP/USD – broken above previous highs this year at 1.2680 last week as well as moving above the 1.2760a area which is 61.8% retracement of the 1.4250/1.0344 down move. This puts us on course for a move towards the 1.3000 area. We now have support at 1.2630.      EUR/GBP – broken below the 0.8530/40 area negating the key reversal day last week and opening up the risk of further losses towards the 0.8350 area. Initial support at the 0.8470/80 area. Resistance at 0.8620.     USD/JPY – continues to push higher and on towards the next resistance at 142.50 which is 61.8% retracement of the 151.95/127.20 down move. Support now comes in at 140.20/30      FTSE100 is expected to open 35 points lower at 7,608     DAX is expected to open 92 points lower at 16,265     CAC40 is expected to open 34 points lower at 7,354   By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
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Rising Rates and Stock Markets: Finding Comfort in Unconventional Pairings - 19.06.2023

Michael Hewson Michael Hewson 19.06.2023 09:44
Rising rates and rising stock markets aren't usually a combination that sits comfortably with a lot of investors but that's exactly what we saw last week, with European markets enjoying their best week in over 2 months, while US markets and the S&P500 enjoying its best week since March.     One of the reasons behind this rebound is a belief that Chinese demand may well pick up as the authorities there implement stimulus measures to support their struggling economy.   There is also a belief that despite seeing the Federal Reserve deliver a hawkish pause to its rate hiking cycle and the ECB deliver another 25bps rate hike last week, that we are close to the peak when it comes to rate rises, even though there is a growing acceptance that interest rates aren't coming down any time soon.     We did have one notable outlier from last week and that was the Bank of Japan who left their current policy settings unchanged in the monetary policy equivalent of what could be described as sticking one's fingers in one's ears and shouting loudly, and pretending core inflation isn't already at 40-year highs.   This week, attention turns to the Swiss National Bank, as well as the Bank of England, who are both expected to follow in the ECB's footsteps and hike rates by 25bps.   The UK especially has a big inflation problem, with average wages up by 7.2% for the 3-months to April, the Bank of England, not for the first time, has allowed inflation expectations to get out of control. This was despite many warnings over the last 18-months that they were acting too slowly, even though they were the first central bank to start hiking rates.     We heard over the weekend from former Bank of England governor Mark Carney that this state of affairs wasn't surprising to him, and that Brexit was partly to blame for the UK's high inflation rate and that he was proved correct when he warned of the long-term effects back in 2016.   Aside from the fact that UK inflation is not that much higher than its European peers, Carney's intervention is a helpful reminder of what a poor job he did as Bank of England governor. At the time he warned of an economic apocalypse warning that growth would collapse and unemployment would soar, and yet here we are with a participation rate at near record levels, and an economy that isn't in recession, unlike Germany and the EU, which are.     The reality is that two huge supply shocks have hit the global economy, firstly Covid and then the Russian invasion of Ukraine, and that the UK's reliance on imported energy and lack of gas storage which has served to magnify the shock on the UK economy.   That would have happened with or without Brexit and to pretend otherwise is nonsense on stilts. If anything is to blame it is decades of poor energy policy and economic planning by successive and existing UK governments. UK inflation is also taking longer to come down due to the residual effects of the energy price cap, another misguided, and ultimately costly government policy.   Carney is probably correct about one thing, and that is interest rates are unlikely to come down any time soon, and could stay at current levels for years.   This week is likely to be a big week for the pound, currently at 14-month highs against the US dollar, with markets pricing in the prospect of another 100bps of rate hikes. UK 2-year gilt yields are already above their October peaks and at 15-year highs, although 5- and 10-year yields aren't.     This feels like an overreaction and while many UK mortgage holders are looking at UK rates with trepidation, this comes across as overpriced. It seems highly likely we will get one rate rise this week and perhaps another in August, but beyond another 50bps seems a stretch and would be a surprise.        With some US markets closed for the Juneteenth public holiday, today's European session is likely to be a quiet one, with a modestly negative open after US markets finished the end of a positive week, with their first daily decline in six days.       EUR/USD – pushed up to the 1.0970 area last week having broken above the 50-day SMA at 1.0880. We now look set for a move towards the April highs at the 1.1095 area. Support comes in at the 50-day SMA between the 1.0870/80 area.     GBP/USD – broken above previous highs this year at 1.2680 last week as well as moving above the 1.2760a area which is 61.8% retracement of the 1.4250/1.0344 down move. This puts us on course for a move towards the 1.3000 area. We now have support at 1.2630.      EUR/GBP – broken below the 0.8530/40 area negating the key reversal day last week and opening up the risk of further losses towards the 0.8350 area. Initial support at the 0.8470/80 area. Resistance at 0.8620.     USD/JPY – continues to push higher and on towards the next resistance at 142.50 which is 61.8% retracement of the 151.95/127.20 down move. Support now comes in at 140.20/30      FTSE100 is expected to open 35 points lower at 7,608     DAX is expected to open 92 points lower at 16,265     CAC40 is expected to open 34 points lower at 7,354   By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
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GBP Holds Steady Ahead of May CPI Release: BoE's Ammunition Questioned, GBP/USD Eyes 1.30, EUR/GBP Trades Offered

ING Economics ING Economics 19.06.2023 09:52
GBP: Steady into Wednesday's May CPI release Sterling is holding onto recent gains and as our UK economist James Smith outlines in our Bank of England preview, we doubt the BoE has sufficient ammunition (yet) to push back against the nearly five 25bp hikes expected before year-end. That suggests sterling can stay supported for the time being.   Technically, GBP/USD does look as though it can advance to the 1.30 area - though the macro catalyst for further gains appears unclear. Indeed, the UK press is really pushing the 'mortgage timebomb' story at present, but sterling probably does not correct lower until we see some softer price data - which may take a few months to come through.   EUR/GBP continues to trade offered. At least a hawkish ECB provides some pushback to the BoE pricing and we continue to forecast a higher EUR/GBP later this year - once the hot UK inflation story cools. EUR/GBP may find support here at 0.8500/8550.
Pound Slides as Market Reacts Dovishly to Wage Developments

Mixed Markets as UK Gilt Yields Surge and China Cuts Lending Rates

Michael Hewson Michael Hewson 20.06.2023 07:44
With US markets closed, markets in Europe underwent a weak and subdued session at the start of the new week with yesterday's declines predominantly on the back of the late Friday sell-off in the US, which saw markets there close off their highs of the week. The lack of any further details on a China stimulus plan, along with additional upward pressure on interest rates over uncertainty about further rate rises, and a slowing global economy, saw European investors engage with some modest profit taking.     Asia markets were mixed this morning, even as the People's Bank of China cut its 1 and 5 year lending rates by a modest 10 bps.     The UK gilt market was the main source of movement in the bond market, with 2-year yields pushing up to their highest level in 15 years, while 5- and 10-year yields came close to the highs we saw at the end of September last year, after the Kwarteng budget.       There is growing anxiety about the effect the recent rise in UK gilt yields is already having on the mortgage market, a concern that was played out in the form of weakness in house building and real estate shares yesterday, as 2-year mortgage deals pushed above 6%.     It is also feeding into a wider concern that economic activity in the second half of the year will be constrained by increased mortgage costs, which in turn will push up rents as well as shrinking disposable income.     All eyes will be on tomorrow's inflation numbers with Bank of England policymakers praying that we start to see rapid slowdowns in how fast prices are rising before the end of the summer.     While prices have been slowing here in the UK they have been slowing more rapidly in the US as well as in Europe, although in Europe they also fell from much higher levels.     Today we get the latest Germany PPI numbers for May which have been slowing sharply from peaks of 45.8% back in August, and had come down to 17.6% by January this year. In today's numbers for May it is expected to see annualised price growth slow further to 1.7%, while seeing a -0.7% decline month on month.     Another monthly decline in today's numbers would be the 7th monthly decline in the last 8 months, in a sign that disinflation is working its way through the system, and could also manifest itself in this week's UK PPI numbers as well.     The puzzle is why it is taking so long to bleed into the headline CPI and core CPI numbers, though it could start to by the beginning of Q3. The Bank of England will certainly be praying it does. As we look towards today's European open its likely to be a modestly higher one.          EUR/USD – have slipped back from the 1.0970 area having broken above the 50-day SMA at 1.0880 which now acts as support. We still remain on course for a move towards the April highs at the 1.1095 area.     GBP/USD – slipped back from 1.2845/50 area with support now at 1.2750 which was the 61.8% retracement of the 1.4250/1.0344 down move. If we slip below 1.2750, we could see further weakness towards 1.2680. Still on course for a move towards the 1.3000 area.      EUR/GBP – remains under pressure and on course for further losses toward the 0.8470/80 area. Currently have resistance at 0.8580 area and behind that at 0.8620.     USD/JPY – still on course for a move towards the next resistance at 142.50 which is 61.8% retracement of the 151.95/127.20 down move. Above 142.50 targets the 145.00 area. Support now comes in at 140.20/30      FTSE100 is expected to open unchanged at 7,588     DAX is expected to open unchanged at 16,201     CAC40 is expected to open 7 points lower at 7,307
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EUR/USD Awaits Catalysts: UK CPI Data and BoE Meeting in Focus

ING Economics ING Economics 20.06.2023 09:30
EUR: Little follow-through buying as yet EUR/USD is becalmed above 1.09 and waiting for the next significant input. Given a light US and eurozone calendar this week, that may mean that EUR/USD gets dragged around by GBP/USD on the release of UK CPI data tomorrow and the Bank of England (BoE) meeting on Thursday.   EUR/USD has just about held above the 1.0910/30 support levels we highlighted yesterday but really needs to push ahead today to confirm bullish momentum. Otherwise the slightly bearish risk environment and strong dollar narrative can suck EUR/USD back down to the 1.0800/0850 area later this week. However, there seem few catalysts for a stronger euro today and ECB speakers seem unlikely to alter expectations that the ECB may hike twice more by the end of this year. Elsewhere, we note EUR/SEK is trading to new highs. Investors remain very focused on the Swedish real estate story. Let's see whether Riksbank Governor Erik Thedeen has more to say on this topic when he speaks at 1540CET today. Earlier this month the Riksbank called on Swedish property companies to strengthen their balance sheets.
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GBP/USD: Strong Upward Trend Raises Concerns and Questions

InstaForex Analysis InstaForex Analysis 20.06.2023 09:35
The GBP/USD currency pair experienced a slight correction on Monday but remained in a strong, short-term, upward trend. The current trend period raises many questions, as we have discussed before. Such explosive growth, reminiscent of Bitcoin, often serves as a precursor to a prolonged decline. Traders are using the last chance to buy in fully, but they will soon start to take profits on long positions, which will be a harbinger of a new downward trend. Of course, this is just a hypothesis, and any hypothesis requires confirmation. So far, there are none.   However, let's draw traders' attention again: even in the short term, the pound shows such strong growth that it needs to be more consistent with the macroeconomic and fundamental background. Over the past few months, we have repeatedly mentioned that we expect a decline in the British pound. The decline has yet to begin, and the British currency cannot even correct itself properly, especially in the 24-hour time frame. Let's ask ourselves: Is the British economy really that strong, and is the Bank of England's stance aggressive enough for the pound to show a rise of 2500 in three quarters? The answer is obvious. Of course, part of this trend should be attributed to a simple technical correction after a significant decline.   Another part of the trend is the pound's recovery after Liz Truss's departure. But even with these two "buts," it seems too much. Interestingly, such a momentum trend can continue for some time. The market sees that the pound is growing and logically continues to buy, even though there are no grounds for it. Therefore, the conclusion remains the same: the pound is rising illogically, and at any moment, this growth may end with a crash, but the upward trend can continue for as long as the market deems necessary, largely ignoring the fundamental background.   Events this week may cause a decline in the pound This week, the Bank of England will hold its regular meeting in the UK. The key rate is likely to increase for the thirteenth consecutive time, which is unsurprising. We receive very few comments and forecasts from Bank of England representatives, making it extremely difficult to predict the regulator's future actions. However, the market does not doubt that monetary policy will be tightened again.   If so, this decision has already been priced in. However, if even one "dovish" hint comes from the Bank of England's corridors, it could end badly for the pound. It is evident to everyone that the Bank of England can only maintain elevated interest rates for a limited period. The rate has already reached 4.5%, and after a deceleration in the tightening pace, two 0.25% rate hikes have already been implemented. This week might witness the occurrence of the third and final hike. The British economy has teetered on the brink of recession for four consecutive quarters, and each subsequent rate increase further raises the likelihood of a recession commencing within this year. However, we have been aware of all these factors for quite some time.       On Monday, there were no noteworthy developments concerning the dollar or the pound. Tuesday will also have scarce news. The real excitement will commence on Wednesday when Jerome Powell, the Chairman of the Federal Reserve, makes his debut appearance in Congress. This event might go unnoticed, as Mr. Powell will provide an account of the Federal Reserve's operations and respond to inquiries from senators and congress members. Since the Federal Reserve is an independent entity not subject to the control of the US government, Powell has no reason to fear. He will not face job loss and can address questions according to his own judgment. It is no secret that US authorities would prefer a less aggressive monetary policy since the regulator's actions have led to a banking crisis. But again, Powell and his colleagues have a different view on this matter: inflation is their top priority. We do not expect any "dovish" statements from Jerome. Accordingly, we do not expect the dollar to weaken after his speeches in Congress. The pound has excellent chances of starting a decline this week if the fundamental background means anything to the market.    
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GBP/USD: Analyzing the Reluctant Downward Movement and Anticipating Volatility Ahead

InstaForex Analysis InstaForex Analysis 20.06.2023 09:39
GBP/USD edged down on Monday. This is a classic depiction of how the pound is currently being traded. When it rises, the movement is sharp, but when it falls, it only edges down. It can rise even without macroeconomic or fundamental reasons, but it is reluctant to fall, even when there are corresponding causes.     For example, yesterday there was an excellent opportunity for a correction based on pure technicals. The pair could have fallen simply because it was overbought. However, instead of a significant correction, we saw the pair reverse its course by just 30 pips amidst a low-volume trading day. Throughout the day, neither the UK nor the US had any important events or reports. Speaking of trading signals, there was nothing notable about it. The pair did not even come close to any significant levels or lines.   This is probably a good thing because weak movements bordering on a flat can lead to false signals. Traders have been fortunate with the euro, but there simply hasn't been any signal for the pound. COT report: According to the latest report, non-commercial traders closed 5,200 long positions and 4,500 short ones. The net position dropped by 700 but remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. In fact, sentiment is now bullish, but it is a pure formality. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run may soon begin even though COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 52,500 sell positions and 65,000 long ones. We do not see the pair extending growth in the long term. 1H chart of GBP/USD In the 1-hour chart, GBP/USD maintains a bullish bias.   The ascending trend line serves as a buy signal but I believe that further growth of the British currency is groundless. The pound sterling has been climbing for too long and downward corrections are short-lived. Judging by the technical indicators, we have an uptrend. Yet, it is hard to find the reasons which may push it higher. However, it is naturally not advisable to sell the pair without proper signals. The market can sustain the trend even without a "fundamental" basis.   On June 20, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2494) and Kijun-sen (1.2724) may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits.   There are no significant events lined up in the UK, and only a few secondary events in the US. We believe that volatility may edge up today, as the Bank of England's meeting and the UK inflation report will be published later this week. The market may start to anticipate and react to this data in advance.  
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Tips and Analysis for Trading GBP/USD: Identifying Entry Points and Managing Risks

InstaForex Analysis InstaForex Analysis 20.06.2023 09:49
Analysis of transactions and tips for trading GBP/USD The price test of 1.2795 on Monday afternoon, coinciding with the significant drop of the MACD line from zero, limited the downward potential of the pair. The empty economic calendar today may fuel pressure on pound, leading to a more significant downward correction. For long positions: Buy when pound hits 1.2795 (green line on the chart) and take profit at the price of 1.2840 (thicker green line on the chart). Growth could occur after a breakdown of 1.2795. However, when buying, traders should make sure that the MACD line lies above zero or rises from it.   Pound can also be bought after two consecutive price tests of 1.2768, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2795 and 1.2840. For short positions: Sell when pound reaches 1.2768 (red line on the chart) and take profit at the price of 1.2728. Pressure may return in the event of inactivity at the highs. However, when selling, traders should make sure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2795, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2768 and 1.2728. What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Read more: https://www.instaforex.com/forex_analysis/346532
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UK CPI Data Sets the Stage for Bank of England Rate Decision

Michael Hewson Michael Hewson 21.06.2023 08:32
UK CPI set to tee up tomorrow's Bank of England rate decision    We've seen a lacklustre start to the week for markets in Europe, as well as the US as disappointment over a weak China stimulus plan, gave investors the excuse to start taking some profits after the gains of recent weeks. Weakness in energy prices also reinforced doubts about the sustainability of the global economy as we head towards the second half of this year.   As we look towards today's European open the main focus is on the latest UK inflation numbers for May ahead of tomorrow's Bank of England rate decision.   Today's UK CPI numbers could make tomorrow's rate decision a much less complicated decision than it might be, especially if the numbers show a clear direction of travel when it comes to a slowing of price pressures. Nonetheless, whatever today's inflation numbers are, we still expect to see a 25bps rate hike tomorrow, however what we won't want to see is another upside surprise given recent volatility in short term gilt yields.   When the April inflation numbers were released, there was a widespread expectation that headline inflation would fall back sharply below 10% and to the lowest levels since March last year. That did indeed happen, although not by as much as markets had expected, falling to 8.7%.       It was also encouraging to see PPI input and output prices slow more than expected in April on an annual basis, to 3.9% and 5.4% respectively.   Unfortunately, this is where the good news ended as while we saw inflation fall back in April it wasn't as deep a fall as expected with many hoping that we'd see headline inflation slow to 8.2%. The month-on-month figure was much hotter than expected at 1.2% and core prices surged from 6.2% to 6.8%, and the highest level since 1990.   The areas where inflation is still looking hot is around grocery prices which saw an annual rise of 19.1%, only modestly lower than the 19.2% in March, while services inflation in hotels and restaurants slowed from 11.3% to 10.2%. Since then, food price inflation has slowed to levels of around 16.5%, still very high, while today's headline number is forecast to slow to 8.5%. More worryingly core prices aren't expected to change at all, remaining at 6.8%, however if we are to look for crumbs of comfort then we should be looking at PPI where in China and Germany we are in deflation.   Given that this tends to be more forward-looking we could find that by Q3 headline CPI could fall quite sharply. Both PPI input and output prices are expected to both decline on a month-on-month basis, while year on year input prices are expected to rise by 1.1%.   In the afternoon, market attention will shift to Washington DC and today's testimony by Fed chair Jerome Powell to US lawmakers in the wake of last week's decision to hold rates at their current levels, while issuing rather hawkish guidance that they expect to hike rates by another 50bps by year end.   This was a little surprising given that inflation appears to be a problem that could be subsiding. Powell is likely to also face further questions from his nemesis Democrat Senator Elizabeth Warren who is likely to further press the Federal Reserve Chairman on the costs that further rate hikes might have in terms of higher unemployment.   Her dislike for Powell is well documented calling him a "dangerous man", however despite these comments her fears of higher unemployment haven't materialised despite 500bps of rate hikes in the past 15 months.   We could also get further insights into last week's discussions with a raft of Fed speakers from the likes of Christopher Waller, Michelle Bowman, James Bullard and Loretta Mester this week.          EUR/USD – currently holding above the 50-day SMA at 1.0870/80 which should act as support. We still remain on course for a move towards the April highs at the 1.1095 area, while above 1.0850.     GBP/USD – slipped back from 1.2845/50 area sliding below 1.2750 with the next support at the 1.2680 area. Still on course for a move towards the 1.3000 area, while above the 50-day SMA currently at 1.2510.      EUR/GBP – found support at the 0.8515/20 area with resistance at the 0.8580 level. While below the 0.8620 area bias remains for a move toward the 0.8470/80 area.     USD/JPY – slipped back from just below the next resistance at 142.50 which is 61.8% retracement of the 151.95/127.20 down move. Above 142.50 targets the 145.00 area. Support now comes in at 140.20/30.      FTSE100 is expected to open 4 points higher at 7,573     DAX is expected to open 42 points higher at 16,153     CAC40 is expected to open 3 points higher at 7,297     By Michael Hewson (Chief Market Analyst at CMC Markets UK)
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UK inflation expected to fall to 8.4%, BoE rate hike likely, Powell's testimony, GBP/USD lower

Kenny Fisher Kenny Fisher 21.06.2023 08:47
UK inflation expected to fall to 8.4% on Wednesday BoE likely to raise rates on Thursday Fed Chair Powell to testify before House committee on Wednesday The British pound is lower on Tuesday. In the European session, GBP/USD is trading at 1.2739, down 0.41%.   UK inflation expected to ease The UK releases the May inflation report on Wednesday and BoE policy makers will be hoping that inflation continues to trend lower. Inflation dropped in April to 8.7%, decelerating for a second straight month. The consensus stands at 8.4%, and the good news is that those awful readings above 10% appear to be over. On a monthly basis, inflation is expected to fall to 0.5% in May, down from 1.2% in April. Inflation appears to have peaked and is heading lower, but nobody at the Bank of England is smiling. The UK is expected to have one of the highest inflation rates in the G-20 this year at 6.9% and the BoE’s 2% target is miles away. Finance Minister Sunak has set a goal of lowering inflation to 5% by the end of the year, which seems feasible if inflation continues to downtrend in the coming months. The BoE will be in the spotlight on Thursday when it makes its rate announcement. The markets have priced in a 25-basis point hike at 70%, with a 30% chance of an oversize 50-bp increase. If inflation falls as expected to 8.4% or lower, the MPC should be able to proceed with the 25-bp hike, although central banks have a tendency of surprising the money markets. In the US, it’s an unusually light data calendar this week. There are no tier-1 releases on Tuesday, and the markets are looking ahead to Wednesday, with Jerome Powell testifying before the House Financial Services Committee. Powell will have to clarify to lawmakers the Fed’s interest rate path, as the Fed paused last week after ten straight hikes but expects to renew hiking in July. . GBP/USD Technical 1.2719 is under pressure in support. Next, there is support at 1.2589 There is resistance at 1.2848 and 1.2950  
GBP/USD Rejected from Key Fibonacci Level: Technical Analysis and Outlook

GBP/USD Rejected from Key Fibonacci Level: Technical Analysis and Outlook

InstaForex Analysis InstaForex Analysis 21.06.2023 09:20
The GBP/USD pair has hit 61% Fibonacci retracement level on the weekly time frame chart located at 1.2778 and so far the price was rejected from that level. This is the line in sand for bears as any breakout higher would be considered even more bullish. So far the monthly high was made at the level of 1.2847. On the lower time frames, like H4, the intraday technical support is seen at the level of 1.2712 and 1.2698. The momentum hit the level of fifty, so it is neutral, but the there is still a chance for the price to move lower towards the technical supports. Please notice, the price was rejected from the 50 MA on H4 time frame chart already.      
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GBP/USD: Uptrend Persists Amidst Market Volatility and Key Events

InstaForex Analysis InstaForex Analysis 21.06.2023 09:41
GBP/USD extended its downward movement on Tuesday, but in general, it remains stable. After a three-day correction, the pair barely managed to test the critical line without surpassing it. Thus, the uptrend persists ahead of an important inflation report in the UK, the Bank of England's meeting, and two speeches by Jerome Powell in the US Congress.   It is evident that these events will impact market sentiment, but it is currently impossible to determine how exactly. We need to be prepared for any developments. We believe that in the medium term, the pound should fall rather than rise, but the market currently holds a different opinion. We do not see any signs of the upward trend coming to an end. There were several trading signals on Tuesday. Initially, the pair bounced off the level of 1.2762, providing a buy signal. Following this signal, the price moved up by about 26 pips, which was enough to set the stop-loss at breakeven. Subsequently, there was a consolidation below the level of 1.2762, after which the pair dropped to the critical line but failed to surpass it. Consequently, it was advisable to close the short position at that point. The profit amounted to approximately 20 pips. The last buy signal formed quite late, but it could have been attempted. It resulted in an additional profit of 10-20 pips. Since the volatility was relatively low, such a level of profit was acceptable.   COT report: According to the latest report, non-commercial traders closed 5,200 long positions and 4,500 short ones. The net position dropped by 700 but remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. In fact, sentiment is now bullish, but it is a pure formality. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run may soon begin even though COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on. The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed.   Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 52,500 sell positions and 65,000 long ones. We do not see the pair extending growth in the long term. 1H chart of GBP/USD In the 1-hour chart, GBP/USD maintains a bullish bias, although it is correcting at the moment. The ascending trend line serves as a buy signal but I believe that further growth of the British currency is groundless. The pound sterling has been climbing for too long and downward corrections are short-lived (like in the last three days). Judging by the technical indicators, we have an uptrend. It is not advisable to sell the pair without proper signals. The market can sustain the trend even without a "fundamental" basis. On June 21, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2532) and Kijun-sen (1.2739) may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits. On Wednesday, the UK has the most important inflation report, and in the US - Federal Reserve Chairman Jerome Powell's first address to the Congress. Thus, it could be an interesting and volatile day. We think that the fall is more likely, but the pair also maintains a bullish bias and the market can start buying the pound again on any background.  
Bank of England Faces Dilemma: Will They Raise Rates by 25bps or 50bps?

Bank of England Faces Dilemma: Will They Raise Rates by 25bps or 50bps?

Michael Hewson Michael Hewson 22.06.2023 08:06
Bank of England set to raise rates again, but by how much?      European markets fell for the third consecutive day yesterday, after the IFO in Germany warned that a recession would be sharper than expected in the second half of the year, and UK core inflation unexpectedly jumped to a new 32 year high. US markets also fell for the third day in a row after Fed chairman Jay Powell doubled down on his message from last week to US lawmakers yesterday, that US rates would need to rise further to ensure inflation returns to target.   This weakness in US markets looks set to translate into a lower European open, as we look towards another three central bank rate decisions, from the Swiss National Bank, Norges Bank and the Bank of England all of whom are expected to raise rates by 25bps today. Up until yesterday's CPI number markets were predicting with a high degree of certainty that we would see a 25bps rate hike from the Bank of England later today.   That certainty has now shifted to an even split between a 25bps rate hike to a 50bps rate hike after yesterday's sharp jump in core CPI to 7.1% in May.   As inflation readings go it's a very worrying number and suggests that inflation is likely to take longer to come down than anticipated, and even more worrying price pressure appears to be accelerating, in contrast to its peers in the US and Europe where prices now appear to have plateaued.   This has raised the stakes to the point that the Bank of England might feel compelled to hike rates by 50bps later today, and not 25bps as expected. Such an outcome would be a surprise from the central bank given their cautious nature over the years, however such has been the strong nature of recent criticism, there is a risk that they might overreact, in a sign that they want to get out in front of things. Whatever they do today it's not expected to be a unanimous decision, but the surge in core inflation we've seen in recent months, does make you question what it is that Swati Dhingra and Silvana Tenreyro are seeing that makes them think that the last few meetings were worthy of a no change vote.    In the absence of a press conference to explain their actions a 50bps rate move would be a risky strategy, as it could signal they are panicking. A more measured response would be to hike by 25bps with a commitment to go more aggressively at the next meeting if the data warrants it. The big problem the bank has is that they won't get to see the July inflation numbers, when we could see a big fall in headline CPI, until after they have met in August, putting us into the end of Q3 until we know for certain that inflation is coming down. The resilience in UK core inflation has got many people questioning why it is such an outlier, compared to its peers, however if you look closely enough the reason is probably staring us in the face in the form of UK government policy and the energy price cap, which has kept gas and electricity prices artificially high for consumers.   If you look at the price of fuel at the petrol pump it is back at the levels it was prior to the Russian invasion of Ukraine, due to the slide in oil prices from their peaks of $120 a barrel, with consumers already benefitting from this disposable income uplift into their pockets directly in a lower bill when it comes to refilling the family car.    Natural gas prices have gone the same way, yet these haven't fed back into consumers' pockets in the same way as they have in the US and Europe.   This has forced employers here, in the face of significant labour shortages, to increase wages to attract the staff they need, as well as keep existing staff to fulfil their business functions. We already know that average weekly earnings are trending upwards at 7.6% and in some sectors, we've seen wage growth even higher at between 15% and 25%.    These increased costs for businesses inevitably feed through into higher prices in the cost of delivering their services, and voila you have higher service price inflation which in turn feeds into core prices, in essence creating a price/wage spiral.   It is perhaps a supreme irony that an energy price cap that was designed to protect consumers from rising prices is now acting in a fashion that is making UK inflation a lot stickier, and making the UK's inflation problem a lot worse than it should be.   So, while a lot of people are blaming the Bank of England for the mess the UK is in, we should also direct some of the blame at the energy price cap, a Labour Party idea that was hijacked by the Conservatives and is now acting as moron premium in the UK gilt market.   It is these sorts of poorly thought through political interventions that always have a tendency to come back and bite you in ways you don't expect, and the politicians are at it again, with the Lib Dems calling for a £3bn mortgage protection scheme, another crackpot idea that would push back in the opposite direction and simply make the task of getting inflation under control even more difficult.     On the plus side there are reasons to be optimistic, with the energy price cap set due to be reduced in July, while PPI inflation has also been falling sharply, with the monthly numbers in strongly negative territory, meaning it can only be a matter of time before the year-on-year numbers go the same way.     This trend of weaker PPI suggests that market forecasts of a terminal bank rate of 6% might be overly pessimistic, and that subsequent data will pull gilt yields lower, however we may have to wait another 2 to 3 months for this scenario to play out in the data.   This should still feed into headline CPI by the end of the year, though core prices might prove to be slightly more difficult to pull lower.      EUR/USD – remain on course for the April highs at 1.1095 while above the 50-day SMA at 1.0870/80 which should act as support. Below 1.0850 signals a move towards 1.0780.   GBP/USD – fell back to the 1.2680/90 area yesterday before recovering, having found resistance at the 1.2845/50 area at the end of last week. Still on course for a move towards the 1.3000 area, while above the 50-day SMA currently at 1.2510.    EUR/GBP – found support at the 0.8515/20 area and has move up towards the recent highs at 0.8620. A move through 0.8630 could see a move towards 0.8680. While below the 0.8620 area the bias remains for a return to the recent lows.   USD/JPY – currently finding itself rebuffed at the 142.50 area, which is 61.8% retracement of the 151.95/127.20 down move. Above 142.50 targets the 145.00 area. Support now comes in at 140.20/30.    FTSE100 is expected to open 45 points lower at 7,514   DAX is expected to open 82 points lower at 15,941   CAC40 is expected to open 34 points lower at 7,227   By Michael Hewson (Chief Market Analyst at CMC Markets UK)
GBP/USD Options Market Anticipates 70 Pip Range on BoE Day

GBP/USD Options Market Anticipates 70 Pip Range on BoE Day

ING Economics ING Economics 22.06.2023 09:34
GBP: Option market prices 70 pip GBP/USD range on BoE day The big day has finally arrived. The market prices 34bp of rate hikes from the Bank of England (BoE) today as the Bank battles second-round inflation in an increasingly febrile political environment. The FX options market prices a 70 pip range for GBP/USD event risk today - which feels a little too narrow. As our UK economist, James Smith, discusses in his BoE preview, it looks too early for the BoE to push back against the very aggressive tightening expectations currently being built into to UK money market curves. These see the Bank Rate nearly 150bp higher at 6.00% early next year. In theory, a 25bp hike (our call) and no BoE pushback can see sterling stay relatively bid. However, it has been noticeable this week that sterling has not followed short-dated UK rates higher  - suggesting investors are looking through the hiking cycle to the pain ahead for the UK economy and asset markets. On balance, we think EUR/GBP has made an important turn higher this week and can easily see it trading back to 0.88 over coming months. The softer dollar environment should keep GBP/USD bid and suggests demand emerges below 1.2700 should the BoE statement or minutes say anything less hawkish than the market expects.
Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

Bank of England Faces Rate Decision: Uncertainty Surrounds Magnitude of Hike

Michael Hewson Michael Hewson 22.06.2023 12:28
Bank of England set to raise rates again, but by how much?    By Michael Hewson (Chief Market Analyst at CMC Markets UK)     European markets fell for the third consecutive day yesterday, after the IFO in Germany warned that a recession would be sharper than expected in the second half of the year, and UK core inflation unexpectedly jumped to a new 32 year high. US markets also fell for the third day in a row after Fed chairman Jay Powell doubled down on his message from last week to US lawmakers yesterday, that US rates would need to rise further to ensure inflation returns to target.     This weakness in US markets looks set to translate into a lower European open, as we look towards another three central bank rate decisions, from the Swiss National Bank, Norges Bank and the Bank of England all of whom are expected to raise rates by 25bps today. Up until yesterday's CPI number markets were predicting with a high degree of certainty that we would see a 25bps rate hike from the Bank of England later today. That certainty has now shifted to an even split between a 25bps rate hike to a 50bps rate hike after yesterday's sharp jump in core CPI to 7.1% in May.     As inflation readings go it's a very worrying number and suggests that inflation is likely to take longer to come down than anticipated, and even more worrying price pressure appears to be accelerating, in contrast to its peers in the US and Europe where prices now appear to have plateaued. This has raised the stakes to the point that the Bank of England might feel compelled to hike rates by 50bps later today, and not 25bps as expected.     Such an outcome would be a surprise from the central bank given their cautious nature over the years, however such has been the strong nature of recent criticism, there is a risk that they might overreact, in a sign that they want to get out in front of things. Whatever they do today it's not expected to be a unanimous decision, but the surge in core inflation we've seen in recent months, does make you question what it is that Swati Dhingra and Silvana Tenreyro are seeing that makes them think that the last few meetings were worthy of a no change vote.      In the absence of a press conference to explain their actions a 50bps rate move would be a risky strategy, as it could signal they are panicking. A more measured response would be to hike by 25bps with a commitment to go more aggressively at the next meeting if the data warrants it. The big problem the bank has is that they won't get to see the July inflation numbers, when we could see a big fall in headline CPI, until after they have met in August, putting us into the end of Q3 until we know for certain that inflation is coming down.   The resilience in UK core inflation has got many people questioning why it is such an outlier, compared to its peers, however if you look closely enough the reason is probably staring us in the face in the form of UK government policy and the energy price cap, which has kept gas and electricity prices artificially high for consumers. If you look at the price of fuel at the petrol pump it is back at the levels it was prior to the Russian invasion of Ukraine, due to the slide in oil prices from their peaks of $120 a barrel, with consumers already benefitting from this disposable income uplift into their pockets directly in a lower bill when it comes to refilling the family car.  Natural gas prices have gone the same way, yet these haven't fed back into consumers' pockets in the same way as they have in the US and Europe.   This has forced employers here, in the face of significant labour shortages, to increase wages to attract the staff they need, as well as keep existing staff to fulfil their business functions. We already know that average weekly earnings are trending upwards at 7.6% and in some sectors, we've seen wage growth even higher at between 15% and 25%.      These increased costs for businesses inevitably feed through into higher prices in the cost of delivering their services, and voila you have higher service price inflation which in turn feeds into core prices, in essence creating a price/wage spiral. It is perhaps a supreme irony that an energy price cap that was designed to protect consumers from rising prices is now acting in a fashion that is making UK inflation a lot stickier, and making the UK's inflation problem a lot worse than it should be.   So, while a lot of people are blaming the Bank of England for the mess the UK is in, we should also direct some of the blame at the energy price cap, a Labour Party idea that was hijacked by the Conservatives and is now acting as moron premium in the UK gilt market. It is these sorts of poorly thought through political interventions that always have a tendency to come back and bite you in ways you don't expect, and the politicians are at it again, with the Lib Dems calling for a £3bn mortgage protection scheme, another crackpot idea that would push back in the opposite direction and simply make the task of getting inflation under control even more difficult.     On the plus side there are reasons to be optimistic, with the energy price cap set due to be reduced in July, while PPI inflation has also been falling sharply, with the monthly numbers in strongly negative territory, meaning it can only be a matter of time before the year-on-year numbers go the same way.   This trend of weaker PPI suggests that market forecasts of a terminal bank rate of 6% might be overly pessimistic, and that subsequent data will pull gilt yields lower, however we may have to wait another 2 to 3 months for this scenario to play out in the data.     This should still feed into headline CPI by the end of the year, though core prices might prove to be slightly more difficult to pull lower.    EUR/USD – remain on course for the April highs at 1.1095 while above the 50-day SMA at 1.0870/80 which should act as support. Below 1.0850 signals a move towards 1.0780.     GBP/USD – fell back to the 1.2680/90 area yesterday before recovering, having found resistance at the 1.2845/50 area at the end of last week. Still on course for a move towards the 1.3000 area, while above the 50-day SMA currently at 1.2510.      EUR/GBP – found support at the 0.8515/20 area and has move up towards the recent highs at 0.8620. A move through 0.8630 could see a move towards 0.8680. While below the 0.8620 area the bias remains for a return to the recent lows.     USD/JPY – currently finding itself rebuffed at the 142.50 area, which is 61.8% retracement of the 151.95/127.20 down move. Above 142.50 targets the 145.00 area. Support now comes in at 140.20/30.      FTSE100 is expected to open 45 points lower at 7,514     DAX is expected to open 82 points lower at 15,941     CAC40 is expected to open 34 points lower at 7,227
Gold Market Sentiment and Analyst Forecasts: Bond Yields and China's Impact

GBP/USD Rebounds from Corrective Level, Bank of England Interest Rate Decision Awaited: Technical Analysis

InstaForex Analysis InstaForex Analysis 22.06.2023 14:03
Yesterday, on the hourly chart, the GBP/USD pair experienced a rebound from the corrective level of 127.2% (1.2777), then dropped nearly to 1.2676 and returned to the 1.2777 level. Another rebound from this level will favor the American currency, leading to a decline toward the Fibonacci level of 100.0% (1.2676). If the pair's rate closes above 1.2777, it increases the likelihood of further growth towards the next corrective level of 161.8% (1.2905).   Trading volumes have been sufficiently high recently, and trader sentiment remains bullish. In a few hours today, the Bank of England will announce its decision on the interest rate.   According to forecasts, the rate will increase by 0.25% again, with 7 out of 9 MPC committee members voting in favor of the hike. This decision has already been factored into current prices, but bullish traders are currently very strong and can accommodate the same rate hike twice.   There is no scheduled speech by Andrew Bailey in the economic events calendar; we must rely on meeting minutes and accompanying letters. Despite yesterday's weak inflation report, the market does not expect a 0.50% rate increase today. As a result, Powell's second speech may have an even greater impact on the pair's movement, but the issue is that these two events almost coincide. When the Fed President's speech begins, it will be difficult to determine whether or not the market pays attention to it.     Therefore, we should anticipate active trading today, but it doesn't necessarily mean the pair will move in one direction. It could be a situation similar to yesterday. On the 4-hour chart, the pair has reversed in favor of the British pound and resumed upward toward the 1.2860 level after two bullish divergences were formed in the RSI and CCI indicators. There are no new emerging divergences observed in any indicators today. If the pair's rate rebounds from the 1.2860 level, it would indicate a reversal in favor of the US dollar, resulting in a decline toward the Fibonacci level of 100.0% (1.2674).  
Breaking Business News: Aaron Rodgers' Shocking Exit, Google's Defense, and Central Banks' Inflation Battle

Bullish Pressure Constrained by Monthly Level: GBP/USD Analysis

InstaForex Analysis InstaForex Analysis 22.06.2023 14:09
GBP/USD Higher timeframes The monthly level of 1.2760 on this segment restrains the bearish pressure, preserving the opponent's achievements. When bullish activity returns and the high of the current correction is updated, the main focus will be on the result of testing the lower boundary of the monthly cloud (1.2893). In the case of breaking through 1.2760, bears will encounter support from the daily short-term trend, which is currently at 1.2666.  
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

UK Retail Sales Outlook and Flash PMI Focus Amid Inflation Concerns - Analysis by Michael Hewson

Michael Hewson Michael Hewson 23.06.2023 11:35
UK retail sales could surprise to the upside, flash PMIs in focus - By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets fell for the fourth day in succession yesterday, driven lower on worries that central banks will look through concerns over a slowdown in economic activity and prioritise the battle against inflation, and look set to open lower this morning.     These concerns have been magnified in recent days with last week's hawkish Fed meeting, followed by the bigger than expected 50bps rate hikes from the Bank of England and Norges Bank yesterday, as investors started to worry that creating a possible recession was likely to become a necessary side-effect in their willingness to push inflation back down to their 2% targets. Certainly, the sticky nature of core inflation is causing a great deal of anxiety not only on the part of central bankers, but also on the part of those who are due to come off fixed rate mortgages in the next 12 months. The hope is that this period of high rates could soon give way to a softening later in the year, however the big rise in core inflation suggests that we may have to endure them for quite a bit longer.     On the plus side the lowering of the energy price cap next month is already seeing energy companies writing to customers and lowering their monthly direct debits with gas prices now back at 2021 levels. This should start to see headline inflation continue to decline into the end of the year.       While concerns over a possible recession are increasing, a lot of the economic data so far thisyear has proved to be reasonably resilient, which makes the timing of yesterday's decision to be more aggressive by the Bank of England a little bit after the fact.   For an economy that is wrestling with food price inflation of close to 20% the resilience seen in the UK consumer has been surprising so far this year, with clothing retailer Next surprising the market earlier this week when it upgraded its full year profits forecasts on better-than-expected trading activity.   Consumer confidence has improved as petrol prices have come down and certainly helped with some of that, however we also can't ignore the recent increase in interest rate costs that are likely to act as a drag in H2 of this year. In April we saw retail sales excluding fuel rise by 0.8%, partially reversing a sharp -1.4% decline in March, which in turn reversed a 1.4% gain in February.   The gain in April was even more surprising given the rise in tax rates, including council tax and other utility bills that kicked in at the start of the fiscal year.   For May estimates are for retail sales to fall by a modest -0.2%, even with recent updates from a few UK retailers pointing to continued resilience when it comes to spending patterns. We also have the latest flash PMI numbers for June which are likely to continue to exhibit one of the more notable trends we've seen in recent months, which has been an ongoing divergence between services sector activity and manufacturing activity.   This trend has also started to manifest itself in China which is seeing its manufacturing sector start to struggle.   In France manufacturing activity remained steady at 45.7, while Germany slipped back to 43.2 from 44.5. Both of these are expected to remain close to current levels.   Services continue to remain resilient but even here activity is cooling off a touch, with France slipping to 52.5 from 54.6, while Germany improved to 57.2 from 56. Again, these are expected to come in slightly weaker at 52.1 and 56.3.   In the UK the picture appears to be more upbeat, although even here manufacturing is struggling, coming at 47.1 in May, while services also slowed to 55.2 from 55.9. UK manufacturing is expected to soften to 46.8 and services to 54.8.     Lower fuel costs may offer some support here; however, most service providers are struggling with higher costs, which by and large they are having to pass on.    EUR/USD – pushed briefly back above the 1.1000 level yesterday before slipping back, with the main resistance at the April highs at 1.1095. This remains the next target while above the 50-day SMA at 1.0870/80 which should act as support. Below 1.0850 signals a move towards 1.0780.     GBP/USD – spiked up to 1.2850 yesterday before slipping back, however it remained above the lows this week at the 1.2680/90 area. Still on course for a move towards the 1.3000 area, while above the 50-day SMA currently at 1.2510, but needs to clear 1.2850.      EUR/GBP – failed between the 0.8630/40 area before slipping back. The main support is at least weeks low at the 0.8515/20 area. A move through 0.8640 could see a move towards 0.8680. While below the 0.8630 area the bias remains for a return to the recent lows.     USD/JPY – has finally cracked the 142.50 area, which is 61.8% retracement of the 151.95/127.20 down move, as it looks to close in on the 145.00 area. Support now comes in at 140.20/30.      FTSE100 is expected to open 27 points lower at 7,475     DAX is expected to open 120 points lower at 15,868     CAC40 is expected to open 53 points lower at 7,150
Barclays H1 2023: Mixed Performance with Strong Investment Banking and Consumer Division

Navigating Uncertainty: Shifting Sentiment in European and US Stock Markets

ING Economics ING Economics 26.06.2023 08:04
European and US stock markets have seen a significant shift in sentiment over the past few days when it comes to the global economy. Rising bond yields, driven by more hawkish central banks, which has prompted investors to reassess the outlook when it comes to valuations and growth.     While European markets saw their biggest weekly loss since March, US markets also took a tumble, albeit the first one in 8 weeks, as a succession of central banks pledged that they had significantly further to go when it comes to raising rates. Bond markets also started to flash warning signs with yield curves becoming more inverted by the day whether they be France, Germany, or the UK. Friday's weak finish hasn't translated into a strongly negative vibe as we start a new week for Asia markets, even allowing for events in Russia at the weekend which aren't likely to have helped the prevailing mood, with the US dollar slightly softer this morning after getting a haven bid at the end of last week.     With economic data continuing to show varying signs of vulnerability, particularly in manufacturing the situation could have got even spicier over the weekend when Wagner Group boss Yevgeny Prigozhin set his troops on the road to Moscow in an insurrection against the Kremlin, and Russian President Vladimir Putin.   As it turns out a crisis was quickly averted when it was announced that Prigozhin would go into exile in Belarus, with any charges against him dropped, and Wagner troops would return to their bases. One can only imagine the reaction if that news had broken if markets had been open at the time, however it only adds to the general uncertainty surrounding the war in Ukraine and how quickly things can start to unravel.   This weekend's events also serve to indicate how fragile Vladimir Putin's position is given that one of his most trusted advisors suddenly went rogue.   As we look ahead to the final week of June and the end of the quarter, as well as the first half of the year we can reflect to some extent that markets have held up rather well when all things are considered. They have been helped in that by the sharp falls in energy prices back to pre-Russian invasion of Ukraine levels, as well as the low levels of unemployment which have served to keep demand reasonably resilient.     The elephant in the room has been the stickiness of core inflation as well as signs that demand is starting to falter, and this week we could get further confirmation of that trend.   Today we get the latest Germany IFO Business Climate survey for June, which if last week's flash PMI numbers are any guide could well show that the confidence amongst German business is faltering, with expectations of a slowdown to 90.6, from 91.7.     We also get flash CPI inflation numbers from Germany, France and the EU where headline prices are likely to show further signs of softening, with core prices set to remain sticky. At around the same time we get the latest PCE inflation numbers from the US for May.   These are likely to be important in the context of the Federal Reserve's stated intention to raise interest rates at least twice more before the end of the year.     In April the core PCE Deflator edged up from 4.6% to 4.7%, an area it has barely deviated from since November last year. You would have thought that even with the long lags seen from recent rate hikes they would start to have an impact on core prices.   This perhaps explains why central banks are being so cautious, even as PPI prices are plunging and CPI appears to be following.       EUR/USD – pushed briefly back above the 1.1000 level yesterday before slipping back, with the main resistance at the April highs at 1.1095. This remains the next target while above the 50-day SMA at 1.0870/80 which should act as support. Below 1.0850 signals a move towards 1.0780.     GBP/USD – currently holding above the lows of last week, and support at the 1.2680/90 area. Below 1.2670 could see a move towards the 50-day SMA. Still on course for a move towards the 1.3000 area but needs to clear 1.2850.      EUR/GBP – failed to rebound above the 0.8630/40 area last week. The main support is at last week's low at the 0.8515/20 area. A move through 0.8640 could see a move towards 0.8680. While below the 0.8630 area the bias remains for a return to the recent lows.     USD/JPY – has finally moved above the 142.50 area, which is 61.8% retracement of the 151.95/127.20 down move, as it looks to close in on the 145.00 area. This now becomes support, with further support at 140.20/30.      FTSE100 is expected to open 6 points higher at 7,468     DAX is expected to open 28 points higher at 15,858     CAC40 is expected to open 8 points higher at 7,171
GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

GBP: BoE Stands Firm on Bank Rate and Mortgage Interest Relief, EUR/GBP Drifts Lower

ING Economics ING Economics 26.06.2023 10:40
GBP: No push back against 6%+ Bank Rate this week There is much discussion in the financial press about central bankers having seen the 'easy', base effect-driven decline in headline inflation. But now they are into the hard yards of getting core inflation down from around 5% – or in the Bank of England's case 7%. In this environment, we should expect no pushback from BoE officials on the pricing of the Bank Rate above 6% early next year. Equally, we expect the government to yield no ground on mortgage interest relief, which would only make the BoE's job harder. EUR/GBP fell on the back of the Eurozone PMI dip last Friday. Despite UK hard landing fears, we are sticking with the initial views we put out in our latest BoE reaction piece. Namely, that a very inverted yield curve probably trumps hard landing fears and that sterling holds onto recent gains for the time being.  On this week's UK calendar is primarily BoE speakers, where Wednesday looks to be the main Sintra event for BoE Governor Andrew Bailey. EUR/GBP can drift back to 0.8520 this week, while GBP/USD should find demand under 1.27.
Navigating Quarter End: Europe Aims for a Higher Start as Markets Show Resilience amid Geopolitical Concerns

Navigating Quarter End: Europe Aims for a Higher Start as Markets Show Resilience amid Geopolitical Concerns

Michael Hewson Michael Hewson 27.06.2023 10:43
Higher start expected for Europe as we drift towards quarter end    Despite weekend events in Russia, European markets proved to themselves to be reasonably resilient yesterday, finishing the day mixed even as the DAX and FTSE100 sank to multi week lows before recovering.     US markets didn't fare much better with the Nasdaq 100 sliding sharply, while the Russell 2000 finished the day higher. While equity markets struggled to make gains there wasn't any sign of an obvious move into traditional haven assets which would indicate that investors had significant concerns about what might come next.     If anything, given how events have played out over the last few years, and the challenges that have faced global investors, the view appears to be let's worry about what comes next when and if it happens, rather than worrying about what might happen in what is becoming an increasingly fluid geopolitical situation.   Bond markets appeared sanguine, as did bullion markets with gold finishing modestly higher, while the US dollar finished the day slightly lower, ahead of the start of this week's ECB central bank forum in Sintra, Portugal which starts today.     Oil prices found themselves edging higher yesterday, largely due to uncertainty over the weekend events in Russia given its position as a key oil and gas producer.   The prospect that we might see supply disruptions if the geopolitical situation deteriorates further may have prompted some precautionary buying. While the crisis appears to have passed quickly the fact that it happened at all has been a bit of a wakeup call and raised some concerns about future long term political stability inside Russia.     One other reason for the so far muted reaction to recent events is that we are coming to the end of the month as well as the first half of the year, with investors indulging in portfolio tweaking rather than any significant shift in asset allocation.   With H2 fast approaching the key decisions are likely to involve determining how many more rate rise decisions are likely to come our way, and whether we can avoid the prospect of a recession in the US.   As far as the UK is concerned it's going to be difficult to see how we can avoid one, having just about avoided the prospect at the end of last year, while the EU is already in one. The US continues to stand out, although even here there is evidence that the economy is starting to slow.     On the data front there isn't much in the way of numbers before the back end of the week and various inflation numbers from Germany, France and the EU, as well as the US. Today we have the latest US durable goods numbers for May, as well as housing data for April and May, which are expected to show signs of softening, and consumer confidence numbers for June. Consumer confidence has been one area which has proved to be the most resilient edging up in May to 102.3. This is expected to continue in June to 103.90, in a trend that appears to be matching the resilience of the labour market.     EUR/USD – not much in the way of price movement yesterday, with resistance back at last week's high just above the 1.1000 level, with the main resistance at the April highs at 1.1095. This remains the next target while above the 50-day SMA at 1.0870/80 which is acting as support. Below 1.0850 signals a move towards 1.0780.     GBP/USD – quiet session yesterday but still holding above the lows of last week, and support at the 1.2680/90 area. Below 1.2670 could see a move towards the 50-day SMA. Still on course for a move towards the 1.3000 area but needs to clear 1.2850.      EUR/GBP – struggling for momentum currently having failed at the 0.8630/40 area last week. The main support is at last week's low at the 0.8515/20 area. A move through 0.8640 could see a move towards 0.8680. While below the 0.8630 area the bias remains for a return to the recent lows.     USD/JPY – while above the 142.50 area, the risk is for a move towards 145.00. This support area which was the 61.8% retracement of the 151.95/127.20 down move, needs to hold or risk a return to the 140.20/30 area. as it looks to close in on the 145.00 area. This now becomes support, with further support at 140.20/30.      FTSE100 is expected to open 22 points higher at 7,475     DAX is expected to open 30 points higher at 15,843     CAC40 is expected to open 20 points higher at 7,204
US Corn and Soybean Crop Conditions Decline, Wheat Harvest Progresses, and Weaker Grain Exports

GBP: Dovish MPC Voices and Aggressive Expectations in Focus

ING Economics ING Economics 27.06.2023 10:58
GBP: No pushback against aggressive expectations Sintra is an important event for sterling as well. While tomorrow’s speech by Bank of England Governor Andrew Bailey is the most awaited event, today’s speech is by the two most dovish voices in the MPC: Silvana Tenreyro and Swati Dhingra. The former will be replaced in the committee by Megan Greene on 5 July and her remarks should have reduced market impact, while any hawkish comments by Dhingra may be read as a de-facto endorsement of the market’s aggressive tightening expectations. The Sonia curve is pricing in a 6.15-6.20% peak rate as of this morning around the turn of the year, and keeping the option of a 50bp hike in August very much on the table (44bp priced in). Data may argue against such aggressive action down the road, but the majority of Bank of England officials look unlikely to vehemently push back against tightening expectations for now. EUR/GBP does not have huge downside room, but a rebound to 0.88 will likely be very gradual.
Market Sentiment and Fed Policy Uncertainty: Impact on August Performance

GBP/USD Faces Resistance and Potential Downside Momentum

InstaForex Analysis InstaForex Analysis 27.06.2023 11:17
GBP/USD has been trading upside this morning but I found rejection of the previous day high at the price of 1.2750. I see potential for the further downside movement. Due to the potential completion of the upside correction ABC and rejection of the previous day high, I see potential for the further drop towards lower reference. Downside objective is set at the price of 1.2690 MACD oscillator is showing decreasing in the upside momentum, which is good sign for the further downside movement. Key resistance is set at the price of 1.2750  
Challenges in the Philippines: Rising Rice and Energy Costs Threaten Inflation Stability

Yen Plummeting to Multiyear Lows Sparks Market Attention

Michael Hewson Michael Hewson 28.06.2023 08:10
Yen in focus as it falls to multiyear lows   After 6 days of declines, European markets managed to break their recent losing streak yesterday, closing marginally higher after a day when the direction could have gone either way. The catalyst for the recovery off the day's lows was a strong US session which was driven by two sets of strong US economic numbers. US consumer confidence for June hit its highest levels in 17 months, while new home sales jumped by 12.2%, the highest number in over a year. If the US economy is starting to struggle then there is little evidence of that in yesterday's numbers, which in turn helped drive a strong finish for US markets, led by the Nasdaq 100.     Yesterday's resilience came in spite of another slide in crude oil prices, which have continued to suffer under the weight of concerns about a slowing global economy and a drop in demand over the second half of the year. The increased stridency of hawkish central bank rhetoric coming out of Sintra in Portugal at the ECB central bank conference, when it comes to future rate hikes is helping to drive yields higher, yet stock markets appear unfazed.     Yesterday we heard from several ECB governing council members, including President Christine Lagarde pushing back against the idea of rate cuts in 2024, as well as signalling a commitment to another rate hike at the July meeting. This seems set in stone now, although this week's June flash CPI number might cast some doubts as to whether the rate hikes might continue beyond July. Today's speaker slate at Sintra could well create more headlines with the likes of Bank of England Governor Andrew Bailey, Bank of Japan governor Kazuo Ueda, Fed chair Jay Powell and Christine Lagarde speaking on a panel discussing monetary policy.     Of particular interest will be any comments from Governor Ueda given the declinesseen in the Japanese yen over the past few days, seeing it sink to 15-year lows against the euro, as well as 8-year lows against the pound, and record lows against the Swiss franc in the last 24 hours. We've already heard from Japanese Finance Minister Suzuki in the last couple of days warning that excessive movements in the yen might prompt an appropriate response. While yen traders are focussing on the 145.00 area against the US dollar it can't have escaped their attention that their currency is getting hit even harder away from the spotlight of the greenback. If a response is coming it could well come soon.     Staying with currencies the Australian dollar plunged overnight after headline CPI slowed sharply on May from 6.8% to 5.6%, well below forecasts of 6.1%, and with the RBA meeting next week this slowdown could prompt the central bank to re-pause the pace of the current rate hiking cycle.   After the European close we also get the latest results from the US bank stress tests, which couldn't be more timely given recent events in March, however they aren't likely to offer much insight into what took place, as the US regional banks were not covered under the various scenarios, as they were considered too small and not systemically important enough. This was a major oversight, as recent experience in Europe has taught us, and particularly in Spain over 10 years ago, where a large cohort of Spanish Cajas nearly brought the economy to its knees and resulted in a banking bailout. Just because a bank is small doesn't mean it won't cause a financial meltdown if its troubles spread. The tests also had a rather big flaw in them in that they didn't factor a sharp rise in interest rates into any of the scenarios, the very scenario that started the dominos tumbling with the collapse of SVB.     EUR/USD – holding above the 50-day SMA and support at the 1.0870/80 area. We have resistance back at last week's high just above the 1.1000 level, with the main resistance at the April highs at 1.1095. Below 1.0850 signals a move towards 1.0780.     GBP/USD – a positive session yesterday holding above the lows of last week, and support at the 1.2680/90 area. Below 1.2670 could see a move towards the 50-day SMA. Still on course for a move towards the 1.3000 area but needs to clear 1.2850.      EUR/GBP – appears to be building up to move higher but needs to move through the 0.8630/40 area. The main support is at last week's low at the 0.8515/20 area. A move through 0.8640 could see a move towards 0.8680. While below the 0.8630 area the bias remains for a return to the recent lows.     USD/JPY – continues to edge higher towards the 145.00 area. We have support at the 142.50 area, which was the 61.8% retracement of the 151.95/127.20 down move. A fall below this support area could see a deeper fall towards 140.20/30.      FTSE100 is expected to open 19 points higher at 7,480     DAX is expected to open 45 points higher at 15,892     CAC40 is expected to open 25 points higher at 7,240       By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
Bank of England's Rate Dilemma: A September Hike and the Uncertain Path Ahead

GBP/USD Shows Minimal Volatility Amid Uncertainty and Overbought Conditions

InstaForex Analysis InstaForex Analysis 28.06.2023 09:13
The GBP/USD currency pair continued to trade with minimal volatility on Tuesday. The chart below clearly shows the volatility values over the past 30 days. The average value has decreased significantly in recent months. It should be understood that 90 points represent two days at 120 points and three days at 70 points. Trading the pair during these "three days at 70" would be extremely inconvenient and difficult.   The British pound has minimally corrected towards the moving average line but has not formed any signals around it. It continues to rise, but its prospects are still highly uncertain due to having already risen by 2500 points and still needing help to correct properly. As we can see, last week, the Bank of England raised the interest rate by 0.5%, but the pound did not show any growth afterward.       In other words, the British currency, which in 2023 takes any opportunity to rise, refuses to do so when it receives the strongest growth factor! Perhaps the market has already priced in all the Bank of England rate hikes? Its key rate has already risen to 5%, so how many more tightening measures can be objectively expected?   How many of them have the market not yet "discounted"? We did not expect such a strong rate hike from the Bank of England, but even in this case, the essence of the matter remains the same. The Bank of England is still close to completing its tightening cycle. Let's remind ourselves that the US dollar started to decline at the first signs of inflation slowing down. In other words, the market has already factored in almost all future rate hikes by the Federal Reserve in advance. We expect something similar from the British pound at the moment. In the 24-hour timeframe, it is evident that there are almost no corrections within the current upward trend. Occasionally, the pair retraces from its local highs by 10-20%, no more.   Therefore, we still believe that the pound is overbought and has risen too strongly, and we expect a decline. The Chief Economist of the Bank of England may surprise the market. There will be a few fundamental events in the UK this week. Today, the Chief Economist of the Bank of England, Hugh Pill, will deliver a speech, and it will be one of the first appearances by a representative of the British regulator after the regulator raised the rate for the thirteenth consecutive time. Thus, Pill's speech has the potential to be very interesting, but it should be noted that he may very well avoid discussing monetary policy. Therefore, it will all depend on what Mr. Pill communicates.   Naturally, the market will await new information on how much more monetary policy tightening is planned in the UK. Jerome Powell's speech should generate less interest among traders, as the head of the Federal Reserve has been speaking quite frequently lately, and the market more or less understands what to expect from the Fed in the upcoming meetings.   The following can be expected: a rate hike of 0.25% is almost guaranteed in July, and then by the end of the year, at most, one more hike can be expected. Inflation in the US is declining at the highest rates, so raising the rate to 5.75% would be excessive. However, the Federal Reserve is in a hurry to suppress inflation and return to normalcy.   And at the moment, the dollar is hardly reacting to all the efforts of the Fed. It has been falling for almost ten months in a row. Thus, overall, the situation remains the same. The pound may continue to rise, but it has long been due for a downward correction of at least 500-600 points. The average volatility of the GBP/USD pair over the past five trading days is 81 points.   For the pound/dollar pair, this value is considered "average." Therefore, on Wednesday, June 28th, we expect movements within a range limited by the levels of 1.2649 and 1.2811. A reversal of the Heiken Ashi indicator downwards will signal a new downward movement phase.  
German Inflation and US Q1 GDP Awaited: Market Focus Shifts

German Inflation and US Q1 GDP Awaited: Market Focus Shifts

Michael Hewson Michael Hewson 29.06.2023 09:24
German inflation in focus, ahead of US Q1 GDP       Having stopped the rot on Tuesday, ending a 6-day losing streak, European markets saw another positive session yesterday, although gains were tempered by remarks from Fed chairman Jay Powell who warned that several more rate hikes could be expected in the coming months, in comments made in an ECB panel discussion in Sintra, Portugal.     US markets finished the day mixed with little in the way of direction, as they digested the various remarks from central bankers, as they all peddled a similar narrative, of further rate rises to come. The Japanese yen continued to decline, already at record lows on a trade-weighted basis, Bank of Japan governor Kazuo Ueda gave little indication that officials were any close to stemming the recent losses. The subdued finish in the US is likely to translate into a flat European open.     There is the hope that upcoming data could prompt a softening of this hawkish message starting today with the latest June inflation numbers from Germany. We've seen a sharp deceleration in the last few months, falling from 7.6% in April to 6.3% in May. Today's June numbers could see a modest increase to 6.8%, which will do little to assuage ECB concerns that inflation is falling back sharply. In the UK the sharp rise in gilt yields in the wake of surging inflation is prompting concerns about the housing market, and more specifically the ability of consumers to pay their existing mortgage or take out new ones.        Since the start of the year, we've seen a modest improvement in mortgage approvals, after they hit a low of 39.6k back in January. The slowdown towards the end of last year was due to the sharp rise in interest rates which weighed on demand for property, as well as weighing on house prices.     As energy prices have come down, along with lower rates at the start of the year, demand for mortgages picked up again with March approvals rising to 51.5k, before slipping back to 48.7k in April. This could well be as good as it gets for a while with the renewed increase in gilt yields, we've seen in the past few weeks, prompting weaker demand for new borrowing. Similarly net consumer credit has also started to improve after similar weakness.     Although inflationary pressures are starting to subside, the increase in wages is unlikely to offset concern over higher rates and higher mortgage costs in the coming months. Given current levels of uncertainty, consumer credit numbers could well increase further, while net lending could see a further decline after April lending fell by -£1.4bn, the weakest number since July 2021.     We also have the final iteration of US Q1 GDP, which was revised up to 1.3% from 1.1% a few weeks ago. The main drag was down to a bigger than expected scaling down in inventories, as well as an upward revision to personal consumption to 3.8%, which was a significant improvement from 1% in Q4, as US consumers went out on a New Year splurge.     Slightly more concerning was rise in core PCE over the quarter, from 4.4% in Q4 to 5%. We're not expecting to see much of a change in today's revisions, although headline might get revised to 1.4%, while most of the attention will be on the core PCE number for evidence of any downward revisions, as more data gets added to the wider numbers. Weekly jobless claims are expected to come in unchanged at 265k.   EUR/USD – holding above the 50-day SMA and support at the 1.0870/80 area, but unable to move through the 1.1000 level. The main resistance remains at the April highs at 1.1095. Below 1.0850 signals a move towards 1.0780.   GBP/USD – slid back sharply below the 1.2670 area, now opens a move towards the 50-day SMA at 1.2540. If this holds, we remain on course for a move towards the 1.3000 area.    EUR/GBP – broken above 0.8630, heading towards the 50-day SMA at 0.8673, which is the next resistance area. Support comes in at the 0.8580 area.   USD/JPY – continues to edge higher towards the 145.00 area. We have support at the 142.50 area, which was the 61.8% retracement of the 151.95/127.20 down move. A fall below this support area could see a deeper fall towards 140.20/30.    FTSE100 is expected to open 2 points higher at 7,502   DAX is expected to open 7 points higher at 15,956   CAC40 is expected to open 10 points higher at 7,296   By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
GBP: Modest Performance Amidst Rate Hike, Equities Lag Behind Eurozone Peers

GBP: Modest Performance Amidst Rate Hike, Equities Lag Behind Eurozone Peers

ING Economics ING Economics 29.06.2023 09:40
GBP: Some underperformance The Bank of England's broad trade-weighted index for sterling has barely budged since last Thursday's 50bp BoE rate hike, where sterling strength against some currencies presumably makes up for some modest weakness against the dollar and the euro. 10-year UK gilt yields - which had briefly fallen on the large hike - equally have barely budged. Where sterling bears may find some solace is that UK large and mid-cap equities have only rallied 0.7% this month - compared to 3% gains for their European peer group. In short, we think it is too soon to start selling sterling on hard landing fears. We think sterling only sells off when the data - both inflation and labour market data - suggest the BoE can ease up in its hawkishness. Until then GBP/USD might find some support near 1.2600 and EUR/GBP could easily drift back under 0.8600.
August CPI Forecast: Modest Inflation Increase Expected Amidst Varied Price Trends

GBP/USD: Bears Regain Control, Eyeing Key Support Levels

InstaForex Analysis InstaForex Analysis 29.06.2023 14:30
GBP/USD Higher timeframes After retesting the zone of influence of the monthly level (1.2760), the bears resumed the decline, closing the previous day below the daily support of 1.2641. The next important level on the path of the bears is 1.2577 (daily medium-term trend + weekly short-term trend). Breaking beyond the mentioned boundaries can strengthen the winner's sentiment and bring about new prospects.    
US Corn and Soybean Crop Conditions Decline, Wheat Harvest Progresses, and Weaker Grain Exports

June 29 Macro Calendar: US Jobless Claims Data and Trading Plans for EUR/USD and GBP/USD

InstaForex Analysis InstaForex Analysis 29.06.2023 14:36
June 29 macroeconomic calendar Today, the US will see the release of its weekly jobless claims data. Figures are projected to grow. Continuing claims are forecast to rise to 1,765,000 from 1,759,000 while initial ones are likely to rise to 265,000 versus 264,000. Trading plan for EUR/USD on June 29 The pair may trade horizontally for a while or bounce due to a sharp price change the day before. Should quotes stay firm below 1.0900, we would see a fall in value. Trading plan for GBP/USD on June 29 Due to a sharp price change in the market, an oversold signal could be generated, which would mean that the pair could come to a standstill or bounce. However, should speculators not respond to technical signals, the price would fall to 1.2550.             What's on chart The candlestick chart shows graphical white and black rectangles with upward and downward lines. While conducting a detailed analysis of each individual candlestick, it is possible to notice its features intrinsic to a particular time frame: the opening price, the closing price, and the highest and lowest price. Horizontal levels are price levels, in relation to which a stop or reversal of the price may occur. They are called support and resistance levels. Circles and rectangles are highlighted examples where the price reversed in the course of its history. This color highlighting indicates horizontal lines which can exert pressure on prices in the future. Upward/downward arrows signal a possible future price direction.  
Pound Slides as Market Reacts Dovishly to Wage Developments

GBP/USD Trading Strategies: Long and Short Positions Based on Chart Analysis and US Economic Data

InstaForex Analysis InstaForex Analysis 29.06.2023 14:38
The test of 1.2645, coinciding with the significant rise of the MACD line from zero, limited the further growth of the pair. Another test occurred short after, and this time it prompted a sell signal, but it did not lead to a strong price decrease.   US labor market data lies ahead, particularly the number of initial jobless claims. GDP data for the first quarter follows, and any decrease in the indicators will likely lead to more pressure on dollar, which will offset buying pressure after Fed Chairman Jerome Powell's speech. Meanwhile, the report on the volume of pending home sales will not be of great interest, unlike the statements of FOMC member Raphael Bostic.   For long positions: Buy when pound hits 1.2665 (green line on the chart) and take profit at the price of 1.2696 (thicker green line on the chart). Growth may continue in the event of poor US statistics. However, when buying, traders should make sure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2643, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2665 and 1.2696.       For short positions: Sell when pound reaches 1.2643 (red line on the chart) and take profit at the price of 1.2609. Pressure will increase in the case of strong statistics from the US. However, when selling, traders should make sure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2665, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2643 and 1.2609.   What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely.   MACD line- it is important to be guided by overbought and oversold areas when entering the market Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate.   If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.  
Turbulent Times Ahead: ECB's Tough Decision Amid Soaring Oil Prices

Inflation Numbers Take Center Stage as Quarter Comes to a Close

Michael Hewson Michael Hewson 30.06.2023 09:50
Inflation numbers a key focus as we round off the quarter       European markets continued their recent patchy performance, as we come to the end of the week, month, quarter, and half year, with the FTSE100 sliding back while the likes of the DAX and CAC40 were slightly more resilient, after German inflation came in slightly higher than expected in June.   US markets were slightly more positive, but even here the Nasdaq 100 struggled after a sizeable upward revision to Q1 GDP to 2%, and better than expected weekly jobless claims numbers sent US yields sharply higher to their highest levels since March, while the US dollar also hit a 2-week high.   The surprising resilience of US economic data this week has made it an absolute certainty that we will see another rate increase in July, but also raised the possibility that we might see another 2 more rate increases after that.   The resilience of the labour market, along with the fact that core inflation remains sticky also means that it makes the Federal Reserve's job of timing another pause much more difficult to time. Today's core PCE Deflator and personal spending numbers for May could go some way to making that job somewhat easier.   Core PCE Deflator is forecast to remain unchanged at 4.7%, while personal spending is expected to slow from 0.8% to 0.2%. While the Federal Reserve isn't the only central bank facing a sticky inflation problem, there is evidence that it is having slightly more success in dealing with it, unlike the European Central Bank which is seeing much more elevated levels of headline and core prices. Yesterday, we saw CPI in Germany edge higher from 6.3% in May to 6.8%, while in Spain core prices rose more than expected by 5.9%, even as headline CPI fell below 2% for the first time in over 2 years.   Today's French CPI numbers are expected to show similar slowdowns on the headline rate, from 5.1% to 4.6%, but it is on the core measure that the ECB is increasingly focussing its attention. Today's EU flash CPI for June is forecast to see a fall to 5.6% from 6.1%, however core prices are expected to edge back up to 5.5% after dropping to 5.3% in May. Compounding the ECB's and other central banks dilemma when it comes to raising rates is that PPI price pressures are falling like a stone and have been since the start of the year, in Germany and Italy. In April French PPI plunged -5.1% on a monthly basis, even as the year-on-year rate slowed to 7% from 12.8%.   If this trend continues today then it might suggest that a wave of deflation is heading our way and could hit sometime towards the end of the year, however while core prices remain so resilient central banks are faced with the problem of having to look in two different directions, while at the same time managing a soft landing. The Bank of England has an even bigger problem in getting inflation back to target, although it really only has itself to blame for that, having consistently ignored regular warnings over the past 18 months that it was behind the curve. The risk now is over tightening just as prices start to fall sharply.   Today's Q1 GDP numbers are set to confirm that the UK economy managed to avoid a contraction after posting Q1 growth of 0.1%, although it was a little touch and go after a disappointing economic performance in March, which saw a monthly contraction of -0.3% which acted as a drag on the quarter overall.   The reason for the poor performance in March was due to various public sector strike action from healthcare and transport, which weighed heavily on the services sector which saw a contraction of -0.5%. The performance would have been worse but for a significant rebound in construction and manufacturing activity which saw strong rebounds of 0.7%.   There is a risk that this modest expansion could get revised away this morning, however recent PMI numbers have shown that, despite rising costs, business is holding up, even if economic confidence remains quite fragile.     One thing we do know is that with the recent increase in gilt yields is that the second half of this year is likely to be even more challenging than the first half, and that the UK will do well to avoid a recession over the next two quarters.       EUR/USD – slid back towards and below the 50-day SMA, with a break below the 1.0850 area, potentially opening up a move towards 1.0780. Still have resistance just above the 1.1000 area.     GBP/USD – continues to come under pressure as we slip towards the 50-day SMA at 1.2540. If this holds, the bias remains for a move back to the 1.3000 area. Currently have resistance at 1.2770.       EUR/GBP – currently being capped by resistance at the 50-day SMA at 0.8673, which is the next resistance area. Behind that we have 0.8720. Support comes in at the 0.8580 area.     USD/JPY – briefly pushed above 145.00 with the November highs of 147.50 beyond that.  Support remains at the 142.50 area, which was the 61.8% retracement of the 151.95/127.20 down move. A fall below this support area could see a deeper fall towards 140.20/30.    FTSE100 is expected to open 18 points higher at 7,489     DAX is expected to open 12 points higher at 15,958   CAC40 is expected to open 8 points higher at 7,320      
Recent Economic Developments and Upcoming Events in the UK, EU, Eurozone, and US

Equity Markets: Reflecting on the First Half and Looking Ahead to the Second

Michael Hewson Michael Hewson 03.07.2023 09:20
The last six months have been an eventful one for equity markets in general with many of the questions that we were faced with at the start of the year, still just as relevant now.   The main question was whether the rebound that started from the lows back in October was simply part of a bear market rally, or whether it was the beginning of a move towards new record highs.   Others included how many more rate hikes could we expect to see, and when would rates start to come down again, with markets pricing in rate cuts in the second part of 2023.   We got the answer to the main question with new record highs for the FTSE100, CAC 40 and the DAX, while US markets also managed to continue their strong performance, breaking out of their own downtrend from their 2021 peaks, during February, shrugging off a March wobble in the process.   Despite the records highs being set by European markets in the first half of this year, one index above all the others has disappointed, that being the FTSE100, which managed to get off to a flier in the early part of the year, hitting a record high above 8,000, before sinking to a six-month low in the space of 4 weeks. Of all the major indices its greater weighting towards banks, and commodities has seen it underperform, largely due to the weakness of the rebound in the Chinese economy, and the fall in oil and gas prices.   The FTSE100 aside, what has been surprising is that, aside from a couple of exceptions, the stock market gains of the last few months have given few signs of disappearing despite interest rates that are significantly higher than they were at the start of the year, with little sign that they will come down any time soon.   That fact alone is a significant shift from where we were at the start of the year, where we had bond markets pricing in rate cuts as soon as Q3 of this year. This always came across as wishful thinking on the markets part, however we've shifted to the other side of the spectrum of market pricing in the prospect of another 100bps of rate hikes by the Bank of England by the end of the year.   In the same way that rate cuts by year end proved to be mispriced, at the start of the year, this pricing by the market could well go the same way.   One thing that has come as a surprise is how resilient equity markets have been in the face of a much sharper rise in 2-year yields from where we were in early January.   What's more there is no sign that central banks are in any mood to slow down their pace of rate hikes, something that is very much reflected in the way 2-year yields have pushed higher this year. US 2-year yields are higher by almost 50bps year to date, UK 2-year gilt yields by an astonishing 169bps, and German 2-year yields by 43bps.   This big jump in UK yields has seen the pound outperform against its peers, rising by 5% against the US dollar, and by as much as 13.5% against the Japanese yen.   While financial markets try to determine how many more rate hikes are coming, the next question is how long they will have to stay at current levels, and what happens when the deflation that is already being seen in the PPI numbers starts to manifest itself in the core inflation numbers.   For now, there is little evidence of that happening with the focus this week more on the continued divergence between manufacturing and the services sector in the form of the PMI numbers, as well as the US payrolls numbers on Friday.     Today's manufacturing PMIs are set to confirm the weak nature of this part of the global economy, with Spain, Italy, France, and Germany PMIs all forecast to slip back to 47.9, 45.3, 45.5, and 41 respectively. UK and US are also expected to remain soft at 46.2 and 46.3 respectively, while the US ISM manufacturing survey, is also forecast to remain below 50, at 47.2, with prices paid at 44.     Markets are already pricing in further rate hikes this month from the Federal Reserve, as well as the ECB, followed by the Bank of England in August, however the bigger question is what comes after these. One suspects we may not see many more after these hikes, however for now markets seem reluctant to come to that conclusion.   That said as we look towards H2 the bigger question is having seen such a positive H1, is there anything left in the tank, to build on those gains over the course of the rest of the year?   A decent Asia session looks set to translate into a positive start for European markets although current unrest in France is likely to prompt questions about economic activity there in the coming weeks.         EUR/USD – finding support at the 1.0830/40 area and 50-day SMA for now, with resistance remaining at the 1.1000 area. A break below the lows last week opens the way for a potential move towards 1.0780.     GBP/USD – still holding above the 50-day SMA at 1.2540, as well as trend line support from the March lows. If this holds, the bias remains for a move back to the 1.3000 area. Currently have resistance at 1.2770.       EUR/GBP – capped last week just below resistance at the 50-day SMA which is now at 0.8663. Behind that we have 0.8720. Support comes in at the 0.8570/80 area.     USD/JPY – saw a key reversal day after popping above 145.00 last week. We currently have support at the 143.80 area, with a break below targeting the 142.50 area. Above 145.20 opens up 147.50.      FTSE100 is expected to open 32 points higher at 7,563     DAX is expected to open 50 points higher at 16,198     CAC40 is expected to open 30 points higher at 7,430
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

GBP/USD: Trapped Between Trend Lines, Market Reaction Minimal to GDP Report

InstaForex Analysis InstaForex Analysis 03.07.2023 11:12
On Friday, the GBP/USD pair did not even try to extend its downward movement. Take note that there was an ascending trend line during the entire bearish correction period (already two weeks), and the British currency does not seem like it is going to fall anytime soon.   At the same time, a new descending trend line has formed on the hourly chart, causing the pair to be trapped between two trend lines. On Friday, the UK released its GDP report. If it did provoke a market reaction, it was minimal, as its value for the first quarter fully coincided with the forecasts. There were no significant reports in the US, and secondary data such as personal income and spending, as well as the Personal Consumption Expenditures Price Index with the Consumer Sentiment Index, were unlikely to add pressure on the dollar. Especially considering that the USD has started falling in the morning. Therefore, we tend to believe that the nature of the movements were more technical. It was almost impossible to predict the upward reversal in the morning. On the hourly chart, a new support area was formed at 1.2598-1.2605, from which the pair rebounded. Currently, it is located between the Senkou Span B and Kijun-sen lines, and has also tested the trend line. There's a high probability of a rebound and a new downtrend, but the movement is currently volatile. The only signal was formed at the beginning of the US session when the price broke through the Ichimoku indicator lines and the level of 1.2693. It was not the best signal, and traders could only gain 10 pips. But it's better than false signals or losses.     COT report: According to the latest report, non-commercial traders opened 2,800 long positions and closed 2,500 short ones. The net position increased by 5,300 in just a week and continues to grow. Over the past 9-10 months, the net position has been on the rise. We are approaching a point where the net position has grown too much to expect further growth. We assume that a prolonged bear run may soon begin, even though COT reports suggest a bullish continuation. It is becoming increasingly difficult to believe in it with each passing day. We can hardly explain why the uptrend should go on. However, there are currently no technical sell signals. The pound has gained about 2,500 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense. Overall, non-commercial traders hold 52,300 sell positions and 104,400 long ones. Such a gap suggests the end of the uptrend. We do not see the pair extending growth in the long term.     1H chart of GBP/USD In the 1-hour chart, GBP/USD maintains a bullish bias, although it is correcting at the moment. The ascending trend line serves as a buy signal. However, we still believe that the British currency is overvalued and should fall in the medium term. The fundamental backdrop for the pound is getting weaker. The dollar also lacks a fundamental advantage but has already lost 2,500 pips over the past 10 months and requires a correction. On July 3, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2737) and Kijun-sen (1.2674) may also generate signals when the price either breaks or bounces off them. A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits. On Monday, manufacturing PMIs are scheduled for release in both the UK and the US. All the reports, except for the US ISM, will be released in the second estimate, which is unlikely to surprise traders. However, the ISM index may show an unexpected value and, accordingly, stir some market reaction.   Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals.   The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  
RBA Minutes Signal Close Decision, US Retail Sales Expected to Rise

GBP/USD Trend Analysis: Anticipating Downward Movement from Key Level with Target at Pullback Level

InstaForex Analysis InstaForex Analysis 03.07.2023 11:23
Trend analysis (Fig. 1). The GBP/USD currency pair may move downward from the level of 1.2693 (closing of Friday's daily candle) with the target at 1.2640, the 38.2% pullback level (blue dotted line). Upon reaching this level, an upward movement is possible with the target of 1.2688, the 38.2% pullback level (red dotted line). Fig. 1 (daily chart). Comprehensive analysis: Indicator analysis - down; Fibonacci levels - down; Volumes - down; Candlestick analysis - down; Trend analysis - down; Bollinger bands - up; Weekly chart - down.   General conclusion: Today, the price may move downward from the level of 1.2693 (closing of Friday's daily candle) with the target at 1.2640, the 38.2% pullback level (blue dotted line). Upon reaching this level, an upward movement is possible with the target of 1.2688, the 38.2% pullback level (red dotted line).   Alternatively, the price may move downward from the level of 1.2693 (closing of Friday's daily candle) with the target at 1.2627, the 14.6% pullback level (red dotted line). Upon reaching this level, an upward movement is possible with the target of 1.2688, the 38.2% pullback level (red dotted line).  
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

European Markets Await RBA Decision as US Observes Independence Day

Michael Hewson Michael Hewson 04.07.2023 08:55
Europe set for flat open, as RBA stays on hold         Yesterday saw a snoozy start to July for European markets with an initially positive open giving way to a mixed session, with US markets only opening for a short time ahead of the US Independence Day holiday today.     US markets finished their shortened trading session making some modest gains, but interest was relatively low-key with the latest ISM manufacturing numbers for June pointing to continued weakness in that part of the US economy.     On a more positive note, if you can call it that, the weak prices paid component of the data showed that inflationary pressure has continued to ease and as such might offer the hope that a July rate hike from the Fed could well be the last one before a lengthy pause.     European manufacturing PMIs also exhibited similar weakness in their respective components, with varying degrees of contraction, however there was a common theme running through them, which was declining output, as well as falls in new orders.     In the UK numbers we also saw reports of falling input costs due to lower fuel costs, commodity price decreases, and improvements in supply chains. Average output prices also fell for the first time since April 2016. These trends would appear to suggest that for all the hawkish narrative coming from central bankers that a wave of disinflation is working its way through the global economy, and that if they aren't careful, they could end up over tightening at a time when inflation is already on a downward path.     That said, central banks biggest problem is that they are so wedded to their 2% inflation target that rather than accepting the fact it may take years to fall back to that level, they risk breaking something in order to get it back there quicker.     Earlier this morning the Reserve Bank of Australia took the decision to follow up its surprise 25bps rate hike of last month, by deciding to keep rates on hold, albeit with the same hawkish bias as last month. The central bank statement went on to say that inflation was still too high and that more tightening may well be required.     With meetings occurring on a monthly basis the bank appears to have decided to wait and see the effects recent rate hikes have had on the wider economy, as well as waiting to see what other central banks do later this month, even though we pretty much know that further rate hikes are coming from the likes of the Federal Reserve and ECB.     With the labour market looking strong, services inflation still looking sticky it remains unlikely that we've seen the terminal rate yet for the Australian dollar, with markets pricing at least another 38bps of hikes by year end, although this number could come down.     Today's European session looks set to be a quiet one with the US off for the 4th July holiday, and little in the way of economic data ahead of tomorrow's services PMI numbers for June which are likely to make for better reading from an economic resilience point of view.           EUR/USD – continues to find support in and around the 1.0830/40 area and 50-day SMA, with resistance remaining at the 1.1000 area. A break below the lows last week opens the way for a potential move towards 1.0780.     GBP/USD – while above the 50-day SMA at 1.2540, as well as trend line support from the March lows, bias remains higher for a move back to the 1.3000 area. Currently have resistance at 1.2770.       EUR/GBP – finding support between 0.8570/80 area, with resistance at the 50-day SMA which is now at 0.8663. Behind that we have 0.8720. Below 0.8560 targets 0.8520.     USD/JPY – slipped back to the 144.00 area yesterday before rebounding but has so far held below 145.00. The key reversal day remains intact while below 145.20.  A break below 143.80 targets a move back to the 142.50 area. Above 145.20 opens up 147.50.      FTSE100 is expected to open unchanged at 7,527     DAX is expected to open 19 points higher at 16,100     CAC40 is expected to open unchanged at 7,386     By Michael Hewson (Chief Market Analyst at CMC Markets UK)
Swiss Inflation Falls Below Expectations; US Markets Closed, Fed Minutes Awaited

GBP/USD: Consolidation above Target Level Signals Potential for Further Upside

InstaForex Analysis InstaForex Analysis 04.07.2023 09:26
GBP/USD Yesterday, volatility was weak, however, the price has consolidated above the target level of 1.2678 on the daily chart. The Marlin oscillator is trying to rise in the positive area, now the price can reach the target level of 1.2785.     If the pound needs to develop a decline, it should consolidate below yesterday's low, then there will be an opportunity to work out fairly strong levels like 1.2600, 1.2572.   On the 4-hour chart, the price is consolidating above the 1.2678 level, above the balance indicator line. The Marlin oscillator is moving sideways in the uptrend territory. Rising signs prevail. If the price fails to reach 1.2785, a breakout of the MACD line around the 1.2745 mark will still be a good attempt to do so.    
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

GBP/USD Analysis: Trading Tips and Transaction Insights for Intraday Traders

InstaForex Analysis InstaForex Analysis 04.07.2023 09:29
Analysis of transactions and tips for trading GBP/USD The test of 1.2679, coinciding with the rise of the MACD line from zero, prompted a buy signal that led to a price increase of over 30 pips. Pound gained in price after buyers flocked into the market due to the weak manufacturing activity data in both the UK and the US. As for today, markets will be closed in the afternoon due to the Independence Day celebrations in the US. Trading activity will also be limited.   For long positions: Buy when pound hits 1.2711 (green line on the chart) and take profit at the price of 1.2744 (thicker green line on the chart). However, do not expect a strong rise in the pair today. When buying, make sure that the MACD line lies above zero or rises from it. Euro can also be bought after two consecutive price tests of 1.2663, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2711 and 1.2744.     For short positions: Sell when pound reaches 1.2663 (red line on the chart) and take profit at the price of 1.2630. Pressure will not be very much today. When selling, traders should make sure that the MACD line lies below zero or drops down from it. Euro can also be sold after two consecutive price tests of 1.2711, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2663 and 1.2630.   What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market       Important:   Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.  
GBP/USD Chart: Neutral Momentum and Symmetrical Triangle Pattern Point to Consolidation and Potential Breakout

GBP/USD Chart: Neutral Momentum and Symmetrical Triangle Pattern Point to Consolidation and Potential Breakout

InstaForex Analysis InstaForex Analysis 04.07.2023 09:31
GBP/USD chart shows a neutral momentum, lacking clear direction. Price may fluctuate between the 1st resistance at 1.2727 and the 1st support at 1.2673. Supports include overlaps and Fibonacci Retracement, while resistances are multi-swing highs and overlaps. A symmetrical triangle pattern suggests consolidation, with potential for bullish or bearish breakout    
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

Michael Hewson Michael Hewson 05.07.2023 08:19
Services PMIs and Fed minutes in focus By Michael Hewson (Chief Market Analyst at CMC Markets UK) In the absence of US markets yesterday, European markets underwent a modestly negative session on a fairly quiet day, and look set to open modestly lower this morning, with Asia markets drifting lower. For the past few days, markets have been trading in a broadly sideways range with little in the way of momentum, as investors weigh up the direction of the next move over the next quarter.   The last few weeks have been spent obsessing about the timing of a possible recession, particularly in the US, with the timing getting slowly pushed back into 2024, even as bond markets flash warnings signs that one is on the horizon.     As we look ahead to Friday's US payrolls report, speculation abounds as to how many more central bank rate hikes are inbound in the coming weeks, against a backdrop of economic data that by and large continues to remain reasonably resilient, manufacturing notwithstanding.     Despite the dire start of manufacturing activity as seen earlier this week, services have held up well, although we are now starting to see some pockets of weakness. A few days ago, in the flash numbers France saw a sharp fall in economic activity, sliding from 52.5 to 48 for June, although activity in the rest of the euro area remains broadly positive.     This is an area of the economy that could help boost economic activity, particularly in Italy and Spain now we're in the holiday season and has seen these two countries perform much better in recent months. The outperformance here could even help avert a 3rd quarter of economic contraction for the euro area.       Expectations for Spain and Italy are 55.7, and 53.1, modest slowdowns from the numbers in May, while France and Germany are expected to slow to 48 and 54.1.     We're also expected to see a positive reading from the UK, albeit weaker from the May numbers at 53.7. US PMI numbers are due tomorrow given the July 4th holiday yesterday.     Later today with the return of US markets, we get a look at the most recent Fed minutes, when the FOMC took the collective decision to keep rates on hold, with the likelihood we will see a resumption of rate hikes later this month.     In the lead-up to the decision there had been plenty of discussion as to the wisdom of pausing given how little extra data would be available between the June and July decisions. The crux of the argument was if you think you need to hike again, why wait until July when the only data of note between the June and July decisions is one payrolls report, and one set of inflation numbers.     All of that is now moot however and while inflation has continued to soften, the labour market data hasn't. Here it remains strong with tomorrow's June ADP report, the May JOLTs report, weekly jobless claims, as well as Friday's June payrolls numbers.     Tonight's minutes may offer up further clues as to the Fed's thinking when it comes to why they think that two more rate hikes at the very least will be needed by the end of this year.     A few members changed their dots to reflect the prospect that they were prepared to raise rates twice more by the end of the year, with a hike in July now almost certain. This stance caught markets off guard given that pricing had been very much set at the prospect of one more rate hike, before a halt.     A key part of the thinking may have been the Fed's determination that markets stop pricing rate cuts by the end of this year. This insistence of pricing in rate cuts by year end has been one of the key characteristics that has helped drive recent gains in stock markets.     This has now been largely priced out, so in this regard the Fed has succeeded,   The key now is to make sure that the Federal Reserve, along with other central banks, while prioritising pushing inflation down, don't break something else, and start pushing the rate of unemployment sharply higher.   This is the balancing act central banks will now have to perform, and here it might be worth them exercising some patience. Given the lags being seen in the pass through of monetary policy it may be that a lengthy pause after July, keeping rates at current levels for months, is a wiser course of action than continuing to raise rates until the tightrope snaps, and the whole edifice comes tumbling down.       Today's minutes ought to give us an indication of the thought processes of the more dovish members of the FOMC, and how comfortable they are with the prospect of this balance of risks.             EUR/USD – remains range bound with support around the 1.0830/40 area and 50-day SMA, with resistance remaining at the 1.1000 area. A break below the lows last week opens the way for a potential move towards 1.0780.     GBP/USD – still looking well supported above the 50-day SMA at 1.2540, as well as trend line support from the March lows, bias remains higher for a move back to the 1.3000 area. Currently it has resistance at 1.2770.       EUR/GBP – rolling over again yesterday, sliding below the 0.8570/80 area, and looks set to retarget the 0.8520 area. Resistance remains at the 50-day SMA which is now at 0.8655. Behind that we have 0.8720.     USD/JPY – currently capped at the 145.00 area, with support at the 144.00 area this week.  The key reversal day remains intact while below 145.20.  A break below 143.80 targets a move back to the 142.50 area. Above 145.20 opens up 147.50.      FTSE100 is expected to open 5 points lower at 7,514     DAX is expected to open 28 points lower at 16,011     CAC40 is expected to open 23 points lower at 7,347
Riksbank's Role in Shaping the Swedish Krona's Future Amid Economic Challenges

GBP/USD Analysis: Bearish Divergence, Three Little Indian, Rising Wedge, and Wolve Waves Point to Potential Downward Trend"

InstaForex Analysis InstaForex Analysis 05.07.2023 09:05
Based on what we can see on its GBP/USD weekly chart, there is a few interesting things: 1. The appearance of Bearish Divergent between Stochastic with GBP/USD. 2. The appearance of Bearish Three Little Indian (Cyan circle). 3. The appearance of Rising Wedge weakening Pattern. 4. There is a Wolve Waves Pattern.     Based on those facts above, Cable seems has the chance to continue its quite huge downward tren, maximum in the next 2 weeks where as long as there is no upward correction rally that exceeds the 1.2850 level, GBP/USD will try to fall down towards the trend line ETA Line of its Wolve Wave or at least to the 1.2307 level as its main target.     
ECB Meeting Uncertainty: Rate Hike or Pause, Market Positions Reflect Tension

Pound Sterling Surprisingly Edges Higher with Low Volatility, Trading Signals and Prolonged Uptrend: A Closer Look at GBP/USD

InstaForex Analysis InstaForex Analysis 05.07.2023 09:00
The GBP/USD pair surprisingly edged higher on Tuesday. Volatility was naturally very low, but nevertheless, the pound sterling moved from the day's low to its high by about 60 points. Along the way, it even formed several good trading signals. Thus, even on a muted day with no economic data scheduled in the calendar, the market found reasons for long positions on the pound. Therefore, we can quite expect the upward movement to be ignited, as GBPUSD has been in a prolonged uptrend since October 2022.   This trend has been driven by momentum, and the pound's growth is groundless. However, keep in mind that the market can push the pair in any direction even without justifications. Two buy signals materialized during the European trading session. First, the pair overcame the level of 1.2693, and then rebounded from it from above, duplicating the buy signal. At the beginning of the US session, it reached the Senkou Span B line (twice), that is, a sell signal was formed.       Therefore, long positions needed to be closed and short ones opened. There were no more signals for the rest of the day, so shorts should have been closed manually closer to the evening. Both deals turned out to be profitable, with a total profit of about 35 points. COT report: According to the latest report, non-commercial traders opened 2,800 long positions and closed 2,500 short ones.   The net position increased by 5,300 in just a week and continues to grow. Over the past 9-10 months, the net position has been on the rise. We are approaching a point where the net position has grown too much to expect further growth. We assume that a prolonged bear run may soon begin, even though COT reports suggest a bullish continuation. It is becoming increasingly difficult to believe in it with each passing day. We can hardly explain why the uptrend should go on. However, there are currently no technical sell signals. The pound has gained about 2,500 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense. Overall, non-commercial traders hold 52,300 sell positions and 104,400 long ones. Such a gap suggests the end of the uptrend. We do not see the pair extending growth in the long term.  
Hungarian Industrial Production Shows Surprise Uptick in Summer

Bullish Bias in 1H Chart of GBP/USD with Potential for Uptrend, Overvaluation Concerns, and Key Trading Levels

InstaForex Analysis InstaForex Analysis 05.07.2023 09:11
1H chart of GBP/USD In the 1-hour chart, GBP/USD maintains a bullish bias, although it is correcting at the moment. The ascending trend line serves as a buy signal. However, we still believe that the British currency is overvalued and should fall in the medium term. The pair overcame the downward trend line, so the pound has an opportunity to show another round of the uptrend. So far, it has not crossed the Senkou Span B line, but it is the last line of defense on the way to a new uptrend. On July 5, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2726) and Kijun-sen (1.2662) may also generate signals when the price either breaks or bounces off them.   A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits. On Wednesday, services PMI numbers for the UK in the second estimate for June will be released. Not the most significant indicator. We have the FOMC minutes for release in the US, which rarely contains important information. The pair will likely go through low volatility, but as we can see, the lack of news does not prevent the pound from continuing to rise against the USD.       Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  
FX Daily: Resistance to Dollar Strength is Futile

GBP/USD Faces Bearish Pressure as It Rejected Intraday Resistance, Approaches Key Support Level

InstaForex Analysis InstaForex Analysis 05.07.2023 09:35
The GBP/USD pair has been rejected from the intraday technical resistance located at 1.2726 and in the short-term the bulls are under pressure. The pair has broken out from the narrow zone located between the levels of 1.2660 - 1.2726 and is currently approaching the 61% Fibonacci retracement level located at 1.2750.   The immediate technical support is seen at the level of 1.2659 (100 MA), but the key technical support is seen at 1.2590. Please notice, the momentum is hovering around the level of fifty, so there is a confirmation of the bearish pressure on the lower time frame charts. Only a sustained breakout above the technical resistance would change the outlook to more bullish.    
New York Climate Week: A Call for Urgent and Collective Climate Action

US ADP and JOLTs data in focus as European markets face continued losses

Michael Hewson Michael Hewson 06.07.2023 08:16
US ADP and JOLTs data a key focus today. European markets have fallen every day this week, although yesterday's losses were by far the worst, and look set to continue again today. US markets also struggled yesterday, although their losses have been much more modest. Yesterday's weakness was driven by concerns over softer than expected Chinese as well as European services PMIs, which fed into increased slowdown worries, as well as rising interest rate risk, which fed into weakness in basic resources, energy and financials, and has translated into further weakness in Asia markets.     Today's Germany factory orders numbers for May could signal a brief respite after 2 months of weakness with a rebound of 1%, up from -0.4% in April, although on an annualised basis it is expected to decline by -9.7%, the 15th month in a row it's been in negative territory.       The release of last night's Fed minutes showcased some significant splits amongst policymakers over the decision to signal a rate pause in June, citing "few clear signs" of progress that US inflation was falling quickly enough.     Some officials wanted to carry on with rate hikes of 25bps but given the "uncertainty" about the outlook it was decided a pause would be preferable, just so long as it was made clear that the door to a July hike, as well as further hikes was pushed to the top of the narrative. This helps to explain the very hawkish guidance with no rate cuts expected by Fed officials until 2024.     The publication of the minutes, and the clear willingness amongst many members to do more on rates saw US 2-year yields close higher on the day, wiping out their early declines.     The committee noted the strength of the US labour market saying it "remained very tight" evidence of which is likely to be borne out by today's data from the JOLTS data for May, the latest weekly jobless claims and the June ADP payrolls report, as well as the latest ISM services numbers.     The resilience of the US labour market was no better illustrated than in the April JOLTS report which saw vacancy numbers surge back above 10m from 9.7m in March. Today's May numbers are expected to see this number drop back to 9.9m, still an eye wateringly higher number, and well above the levels we saw pre-pandemic.     Weekly jobless claims also appear to have hit a short-term peak sliding back from 265k to 239k last week and are expected to edge higher to 245k. While weekly claims have been rising in recent weeks continuing claims have been falling, slipping to a 3-month low last week of 1,742k.     Today's ADP payrolls report is expected to see another solid number of 225k, down slightly from 278k.     While the number of job vacancies available remains at current levels it's hard to imagine a scenario where we might see a weak jobs report in the coming months, which means that its unlikely to be the labour market that prompts the Fed to signal a pause in the near term.     Services inflation has been the one area which the Fed has expressed concern that it might be stickier than it needs to be.     Today's ISM services report is expected to see headline activity edge higher to 51.3, while a close eye will be kept on prices paid which slowed to 56.2 in May, and a 3-year low.        EUR/USD – looks set for a test of support around the 1.0830/40 area and 50-day SMA, with resistance remaining at the 1.1000 area. A break below the lows last week opens the way for a potential move towards 1.0780.   GBP/USD – still in a tight range with support above the 50-day SMA at 1.2540, as well as trend line support from the March lows, bias remains higher for a move back to the 1.3000 area. Currently have resistance at 1.2770.     EUR/GBP – looks set to retarget the 0.8515/20 area and June lows, while below resistance at the 0.8570/80 area. Below 0.8510 targets the 0.8480 area. We also have resistance remaining at the 50-day SMA which is now at 0.8655. Behind that we have 0.8720.   USD/JPY – looks set for a test of the 143.80 area, while below the key resistance at 145.20. A break below 143.80 targets a move back to the 142.50 area. Above 145.20 opens up 147.50.    FTSE100 is expected to open 30 points lower at 7,412   DAX is expected to open 84 points lower at 15,853   CAC40 is expected to open 50 points lower at 7,260
US Non-Farm Payrolls Disappoint: What's Next for EUR/USD?

Inflation Front and Centre: China Slips Towards Deflation, European Markets Face Declines

Michael Hewson Michael Hewson 10.07.2023 10:48
Inflation front and centre this week as China slips towards deflation By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets underwent a shocker of a week last week, posting their biggest declines since March, despite a modest rebound on Friday. With economic data continuing to look on the soft side and central banks showing little sign of easing up when it comes to interest rate rises there was little to cheer for markets in Europe, with concerns about weakness in the Chinese economy adding to the gloom.   US markets on the other hand, while still finishing the week lower, still managed to perform better after a slightly weaker than expected non-farm payrolls job report, which showed that the US economy added 209k jobs in June, down from 306k in May. There was also a 2-month net revision lower of -110k, taking some of the lustre off recent gains, and removing some of the euphoria around the ADP jobs number of 497k, the day before. The unemployment rate still fell to 3.6%, while average hourly earnings growth came in unchanged at 4.4%, which was at a slightly higher level than expected. One thing that we were able to take away from last week was that further rate rises from the Federal Reserve as well as the European Central Bank are almost certain when they both meet in 2 weeks' time, however there is now rising concern that we may see further rate increases after that in September as well.     The bond market is certainly reflecting the fact that rates are likely to stay higher for longer after the yield curve steepened as 10-year yields outperformed 2-year yields on a week-on-week basis.   With earnings season set to get underway in earnest over the next week or so, there is increasing nervousness that after such a good first half of the year, that the second half of the year is likely to be much more challenging.   What last week's economic data also tells us is that while the economy in Europe could well be set to contract for the third successive quarter in succession, the US economy appears to be holding up reasonably well There is a fear however that central banks are on the cusp of a serious policy mistake when it comes to their determination to drive inflation lower. We already know that inflation has been slowing sharply over the last few months, and we also know that PPI inflation in China and Europe is now in negative territory.       This morning we saw that inflation in China slowed even further in June with headline CPI coming in at 0%, and PPI slipping from -4.6% in May to -5.4% That alone suggests that the rate hikes that have already been implemented over the past 15 months have had an effect, however such is the nature of monetary policy, and the way interest rate markets have changed over the last 20 years, with many more fixed rate loans, there is no way of telling how much more tightening has yet to come through.     This should make central bankers much more cautious, however it seems to be having the opposite effect, causing frustration that inflation isn't coming down quickly enough, due to resilient consumption patterns. With US CPI for June set to be released on Wednesday, and PPI on Thursday we are likely to see further evidence of this disinflationary trend, even while wages growth remains resilient. These are the key macro items for investors to mull over this week ahead of the Federal Reserve later this month, while in the UK tomorrow we have the latest wages and unemployment numbers for the 3-months to May, which are expected to show strong wages growth against a backdrop of a tight labour market.           EUR/USD – broke higher last week after finding solid support around the 1.0830/40 area. We need to see a move above the June highs at 1.1010/15 to target a move towards 1.1100, and the highs this year. A break below the lows last week opens the way for a potential move towards 1.0780.     GBP/USD – broke above resistance at the 1.2770/80 area putting it on course for a move towards the 1.3000 area, but needs to take the 1.2850 area and June highs first. Support comes in at the 1.2770/80 area, and below that at 1.2680.      EUR/GBP – continues to find support at the 0.8515/20 area and June lows. Also has resistance at the 0.8570/80 area. We also have resistance at the 50-day SMA which is now at 0.8635. Below 0.8500 targets 0.8460.     USD/JPY – fell below the 144.00 area triggering stops all the way to the 142.00 area, also falling below support at 142.50. Posted a weekly reversal suggesting the top is in and the risk of a return to the 139.80 area. We need to see a move back above 142.80 to stabilise and argue for a return to 144.00.       FTSE100 is expected to open 3 points lower at 7,254     DAX is expected to open unchanged at 15,603     CAC40 is expected to open 14 points lower at 7,098  
GBP/USD Reversal Potential: Targeting 1.2870

GBP/USD Reversal Potential: Targeting 1.2870

InstaForex Analysis InstaForex Analysis 10.07.2023 11:56
GBP/USD On Friday, the pound sterling rose almost 100 points, the price rose above the nearest peak from June 16. Conditions for forming a reversal divergence on the daily chart have been met. The pound can reach the target level of 1.2870.       If the price consolidates above this level, the divergence will not form, and the price may continue to rise in the range of 1.3000/70 (this is a small consolidation in the second half of April 2022). The sign of a reversal is when the price settles below 1.2785. The current situation is uncertain.   On the four-hour chart, the price is rising above both indicator lines, the Marlin oscillator has turned down, but so far it looks like a discharge before it rises further.  
Market Digest: Fed Minutes and Employment Data Spark Pessimism, Impacting Global Stock Markets and Currency Pairs

Market Digest: Fed Minutes and Employment Data Spark Pessimism, Impacting Global Stock Markets and Currency Pairs

InstaForex Analysis InstaForex Analysis 10.07.2023 12:01
Global stock markets edge lower amid pessimism sparked by the latest Fed minutes and contrasting employment figures from ADP and the US Department of Labor. Obviously, investors continue to be stirred up by the potential rate hikes by global central banks, primarily the Federal Reserve. The recent private sector employment data from the ADP, which indicated strong growth in new jobs, primarily in the services sector, increased the chances of seeing an increase in rates. However, the situation became uncertain after the US Department of Labor published its official data on the number of new jobs in the non-agricultural sector. Reportedly, employment rose by 209,000, lower than the 225,000 the previous month. Still, this figure remains above the threshold of 200,000, indicating an overall continuing positive pace of employment growth, but with the risk of a significant fall in the future. The currency and commodities markets reacted to the news rather coolly, effectively confirming the theory that the stabilization of US inflation or the resumption of its growth could force the Fed to continue raising interest rates. Latest inflation data from China, Germany, and the US lies ahead, but more focus will be given to the consumer price index in the US. Forecast says the overall figure will fall to 3.1% y/y, but increase by 0.3% m/m. Such figures will boost risk appetite, accompanied by a weakening of dollar as treasury yields fall. The chances of seeing further rate hikes will drop as well.     EUR/USD The pair hit 1.0970. Surpassing this level amid a decrease in US inflation will push the quote 1.1100.   GBP/USD The pair trades at 1.2835. A consolidation above it, which could be spurred by falling US inflation and steady expectations of rate hikes from the Bank of England due to high inflation, may bring the quote to 1.2985.  
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UK Gilt Yields in Focus as Wages Data Awaited, European Markets Gain

Michael Hewson Michael Hewson 11.07.2023 08:32
UK gilt yields in focus, ahead of latest wages data By Michael Hewson (Chief Market Analyst at CMC Markets UK)     European markets managed to procure a second successive day of gains yesterday, despite a slide in Asia markets, after Chinese inflation slipped further towards deflation. The FTSE100 also managed to eke out a daily gain for the first time this month bringing an end to a sequence of 5 successive daily losses.     US markets also underwent a cautious start to the week with attention focussed on this week's inflation numbers, which are due tomorrow and could go some way to indicating whether we see any more rate hikes beyond this month.   While last week's losses were largely predicated on concerns that central banks were gearing up for multiple rate rises in the coming months, the data out of China appears to suggest that the bigger danger in the coming months might be deflation. Today's final Germany inflation numbers are expected to confirm that June CPI rose to 6.8% from 6.3% in May, although most of that rise appears to have been attributed to one-off factors that won't be repeated in the coming months, after temporary reductions in rail fares were reversed.     The pound had a slightly softer tone yesterday after a private sector survey showed that wage growth is starting to slow along with the pace of hiring in June. There has been little evidence of this trend in any other recent data, although with the latest ONS numbers due today there is more of a lag.     Just over a month ago the April UK wages numbers reinforced the challenge facing the Bank of England, after wage growth surged to 7.2%, and a record high outside of the pandemic, prompting a surge in UK 2-year gilt yields which took them above their October peaks of last year in the wake of the ill-fated Kwarteng budget.     The surge in the last few months wages has served to highlight the abject policy failure of the Bank of England to act early enough, as workers already being squeezed on all sides agitate for bigger pay rises in order to close the real wages gap. Today's May wages data is unlikely to see much evidence of a weakening in these upward pressures with expectations of 7.1% for the 3-months to May.       Short term yields have continued to rise in anticipation of further rate rises in the coming months, although we have seen a pullback in the last couple of days, from 15-year highs in UK 2-year yields. If today's wage numbers continue to look sticky, the central bank may find it has no good options when it comes to getting prices under control.     The number of people in employment also rose to a record 76% as high food inflation forced people back into work, forcing the unemployment rate down to 3.8%, where it looks set to stay this month. It's also important to note that the wages numbers are average numbers which means in a lot of cases, pay rises are much higher in certain areas of the economy, trending at between 10% to 20%. This trend may slow in the coming months; however, it is unlikely to slow rapidly even as headline inflation starts to come down rapidly after July.     Later on, this morning, the July German ZEW survey is expected to show a further deterioration in expectations sentiment to -10.6 down from -8.5, with the current situation expected to fall to -62, from -56.5.               EUR/USD – We need to see a move above the June highs at 1.1010/15 to target a move towards 1.1100, and the highs this year. A break below the lows last week at 1.0830, opens the way for a potential move towards 1.0780.     GBP/USD – fell back to 1.2750 yesterday, before making new 14-month highs nudging above the June highs, as we continue to look for a move towards the 1.3000 area. Main support at 1.2680 area.       EUR/GBP – tested up to the 0.8570/80 area yesterday before slipping back. Still have support at the 0.8515/20 area and June lows. We also have resistance at the 50-day SMA which is now at 0.8630. Below 0.8500 targets 0.8460.     USD/JPY – continues to look soft falling below 142.00 with the risk of further losses towards the 139.80 area. Last weeks' weekly reversal suggests that a short-term top might be in. We need to see a move back above 142.80 to stabilise and argue for a return to 144.00.     FTSE100 is expected to open unchanged at 7,274     DAX is expected to open 45 points higher at 15,718     CAC40 is expected to open 18 points higher at 7,162
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GBP: Strong Wage Data Extends GBP/USD Rally and Keeps Bank of England Hawkish

ING Economics ING Economics 11.07.2023 08:58
GBP: Pay data can keep the Bank of England hawkish for longer GBP/USD has risen to the highest levels since last April on the back of some strong UK wage data for May. As our UK economist James Smith notes, the upward surprise to UK wage growth is partly down to backward revisions. But that is not a huge comfort because looking at the private sector, which is what the Bank of England focuses on, we have seen another big month-on-month increase in pay. Whether that is partly because of the ongoing passthrough of the new National Living Wage (+10% in April), is not clear. But certainly, these are not figures the BoE will want to see and will maintain the market's exceptionally aggressive pricing of the Bank Rate up near 6.40% early next year. GBP/USD looks set to extend to 1.30 in this soft dollar environment, while EUR/GBP can retest the lows near 0.8520. 
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Mixed Signals: US Dollar Weakens, Eurozone Faces Recession, Pound's Fate Hangs in the Balance

InstaForex Analysis InstaForex Analysis 11.07.2023 09:05
The ADP report on employment in the private sector, published a day before the non-farm payroll data release, was so shocking that it instantly raised expectations for the labor market as a whole, leading to rapid repositioning on Friday before the data release. However, the non-farm payroll figures were significantly weaker than expected, with 209,000 new jobs created (225,000 expected), and data for the previous two months were revised downwards by 110,000. Employment growth is slowing, but the pace remains high. As for wage growth, the figures were an unpleasant surprise for the Federal Reserve. In June, wages increased again by 0.4% instead of the expected 0.3%, and annual growth rates remained at 4.4%, which is higher than the 4.2% forecast. Steady wage growth does not allow inflation expectations to fall, the growth of real rates does not allow the Federal Reserve to start lowering the rate this year.       The U.S. inflation index, which will be published on Wednesday, is the main event of the week and the last important data before the Fed meeting at the end of July. The markets expect an 89% probability of a quarter-point rate hike. Furthermore, the probability of another increase in November has already exceeded 30%, and the first cut is now expected only in May of next year. The U.S. dollar fell after the data release and ended the week weaker than all G10 currencies. The growth of real rates in the current conditions makes a recession in the U.S. almost inevitable.   EUR/USD The Sentix Economic Index for the eurozone has fallen for the third time in a row to -22.5 points, a low since November 2022, and expectations also remain depressed. The eurozone economy has fallen into a recession as of early July. The situation in Germany is even more depressing – the index has fallen to -28.5 points, and the possibility of improvement is ephemeral.     The ZEW index will be published on Tuesday, and the forecast for it is also negative, with a decrease from -10 points to -10.2 points expected in July. On Thursday, the European Commission will present its forecasts. Bloomberg expects that industrial production in the eurozone fell in May from 0.2% y/y to -1.1% y/y, a sharp decline that characterizes the entire eurozone economy as negative and tending to further contraction.   Under the current conditions, the European Central Bank intends to continue raising rates, and even plans to shorten the reinvestment period of the PEPP program. If this step is implemented, a debt crisis, which will put strong bearish pressure on the euro, is inevitable in the face of capital outflows to the U.S. and an expanding recession.   The net long position on the euro has hardly changed over the reporting week and amounts to just over 20 billion dollars, positioning is bullish, there is no trend. However, the calculated price is still below the long-term average and is trending downward.     The euro attempted to strengthen on Friday in light of the news, but it was unable to rise beyond the borders of the technical figure "flag", let alone higher than the local high of 1.1012. We assume that the corrective growth has ended, and from the current levels, the euro will go down, the target is the lower boundary of the "flag" at 1.0730/50. GBP/USD Updated data on the UK labor market will be published on Tuesday. It is expected that the growth of average earnings including bonuses increased in May from 6.5% to 6.8%, and if the data comes out as expected, inflation expectations will inevitably rise. As will the Bank of England's peak rate forecasts. The NIESR Institute expects that further rate increases could trigger a recession.   The cost of credit is rising, and an increase in the volume of bad debts is inevitable in an economic downturn. Inflation did not decrease in May, contrary to expectations, and remained at 8.7%, even though energy prices significantly decreased. Food inflation on an annual basis reached 18.3%, and core inflation at 7.1% is at its highest since 1992. The labor force is decreasing, and if this trend is confirmed on Tuesday, it will almost inevitably result in increased competition for staff, which will mean, among other things, the continuation of wage growth. The Bank of England has already raised the rate to 5%, with forecasts implying two more increases. What does the current situation mean for the pound?   If the economy can keep from sliding into a recession, then in conditions of rising nominal rates, the yield spread will encourage players to buy assets, leading to increased demand for the pound and its strengthening. However, if signs of recession intensify, which could be clear as soon as Thursday when GDP, industrial production, and trade balance data for May will be published, the pound will react with a decrease, despite high rate expectations. After impressive growth two weeks ago, pound futures have stalled at achieved levels, a weekly decrease of just over 100 million has no significant impact on positioning, which remains bullish.  
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GBP/USD: Testing Key Resistance Levels Amidst a Challenging Path to Upside Breakout

InstaForex Analysis InstaForex Analysis 11.07.2023 09:10
Last Friday, the GBP/USD pair tested the 1.2850 support level, which corresponds to the upper line of the Bollinger Bands indicator on the daily chart. From a formal point of view, the pound has renewed its multi-month price peak (the last time the pair was at this level was in April), but in reality, the situation doesn't look so rosy for buyers. Over the past three weeks, the pound has repeatedly approached the 1.2850 target, but each time it stopped just a few steps away from this price barrier.   Take a look at the weekly and daily GBP/USD charts: since mid-June, the pair has shown wave-like dynamics, as it repeatedly tries to overcome the stubborn resistance level. By the way, the last attempt also ended in failure.   At the start of the new trading week, sellers took the initiative again, pulling the price into the 27th figure range. A news catalyst is needed The pound needs a strong news catalyst to break through the defense (1.2850), approach the boundaries of the 29th figure, and in the future claim the heights of the 30th price level. Undoubtedly, such a scenario is possible in the case of a massive weakening of the greenback, but as practice shows, even in this case, the pound should play not the role of the follower, but the leader.   As already mentioned above, the GBP/USD pair has been moving in an uptrend since mid-June. Initially, support for the pound came from data on rising inflation in the UK. It turned out that the core consumer price index, excluding food and energy prices, jumped to 7.1% in May, while most analysts predicted it would fall to 6.7%. The indicator renewed a multi-year record - this is the strongest pace of growth of the indicator since 1992. Within the current year, the indicator demonstrates an uptrend for the second month in a row. This fact strengthened the pound's position, but its main "ally" turned out to be the Bank of England, which unexpectedly raised the interest rate by 50 basis points a few days after the release (the base forecast assumed a 25-point hike). Moreover, in its accompanying statement, the central bank did not soften its wording and hinted at further tightening of monetary policy.   The central bank, in particular, indicated that it will continue to "carefully monitor signs of inflationary pressure in the economy, including the labor market situation and wage dynamics, as well as inflation in the services sector." At the same time, the Bank warned that if signs of more persistent pressure are recorded in the future, a further increase in the interest rate will be needed. The events of the past month allowed buyers to cover almost a 500-point path: at the beginning of June, the price fluctuated at the base of the 24th figure, while on the wave of the upward momentum it grew to the middle of the 28th figure. But the 1.2850 target became a local price ceiling for the bulls.   In order to build an upward move, you need to experience a kind of deja vu: further inflation growth (this time in June) + hawkish results of the next BoE meeting. However, to successfully transfer to the price echelon 1.2850 - 1.3000, it is enough to fulfill only the first point of the "plan" (provided that the dollar index remains in its previous positions and does not strengthen after the release of US inflation data).   Important reports ahead The consumer price index in the UK for June will be published next week - July 19th. This will be key in the run-up to the next - August - BoE meeting. But in addition to the inflation report, one should also pay attention to another report - in the field of the UK labor market. It will be published on Tuesday. If the main components turn out to be in the green zone (especially the pro-inflation indicator), the pound will receive a kind of "advance assistance", which will be greatly enhanced in case of a strong inflation report. In other words, if both releases (labor market + inflation) are in the green zone, the probability of a rate hike in August will significantly increase, and this fact will support the British currency.   According to preliminary forecasts, the unemployment rate will remain at the same level (3.8%), the number of employed will increase by 20,000 (after falling by 13,000 in the previous month), and the wage component will show contradictory dynamics: with the payment of bonuses, the indicator will rise to 6.8%, without bonuses - it will decrease slightly, to 7.1%. Overall, if you trust the forecast estimates, Tuesday's reports can support the British currency.   If the indicators turn out to be in the green (especially the wage component of the report), buyers may again test the resistance level of 1.2850, which turned out to be a "tough nut to crack". But even in this case, the pound is unlikely to settle above this target and settle within the 29th figure. In my opinion, such a scenario is possible in case of an acceleration in the growth rate of the UK CPI and/or a large-scale weakening of the US currency. From a technical point of view, on the daily chart, the price is between the middle and upper lines of the Bollinger Bands, which speaks of the bullish bias.   On the daily and weekly charts, the Ichimoku indicator formed a bullish "Parade of Lines" signal, when the price is above all lines of the indicator, including above the Kumo cloud. This signal also indicates bullish sentiments. The nearest target is the aforementioned mark of 1.2850 (the upper line of the Bollinger Bands on D1). The next level of resistance (and, accordingly, the next target) is the 1.2950 mark - this is also the upper line of the Bollinger Bands indicator, but already on the weekly chart.
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Reaching for Resistance: GBP/USD Targets 1.3000 Amid Divergence Signals

InstaForex Analysis InstaForex Analysis 11.07.2023 09:14
GBP/USD In a complex and convoluted game shown on Monday, the pound sterling reached the target level of 1.2870. Conditions for divergence with the Marlin oscillator were formed.     But these are bare minimum conditions for a divergence, with the pound's strength, it can easily rise to the next resistance level of 1.3000, and from there it can form a stronger signal for a reversal. The divergence will remain, it will become more light and moderate.     On the four-hour chart, the situation is standard for moderate growth: there was a reversal of the oscillator signal line from the zero line, and the price is rising above both indicator lines. Consolidation above 1.2870 will allow the price to extend its growth. The first sign of a reversal (from the current level) will appear only when the price is firmly trading below 1.2785.  
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Navigating Volatility: Analyzing GBP/USD on 30M Chart for Intraday Trading Success

InstaForex Analysis InstaForex Analysis 11.07.2023 09:22
Analyzing Monday's trades: GBP/USD on 30M chart     The GBP/USD pair managed to both rise and fall on Monday. The pound sterling corrected against Friday's decline, but in the second half of the day, it traded higher again, which corresponds to the current trend. There were no important economic reports in the UK or in the US.   Three representatives of the FOMC spoke in the US, and Bank of England Governor Andrew Bailey is usually speaking in the UK around this time. For obvious reasons, Bailey's speech could not have any influence on the pair's movements during the day. And the FOMC members' speeches took place in the evening, so they also could not have provoked either the morning fall or the afternoon rise.   However, volatility was over 100 points, which is quite a lot for a Monday. The uptrend persists, and we have to point out that the growth is groundless, but there's nothing we can do if the market wishes to buy the pair, regardless of the fundamental background.   GBP/USD on 5M chart   Several entry points materialized on the 5M chart. First, the pair bounced twice from the level of 1.2801 (buy signals duplicated each other), but it only rose by 13 pips. It was impractical to work out these signals, as there was a high probability of a flat on Monday, and the Stop Loss on the deal should have been set below the level of 1.2779. When a sell signal was formed in the form of overcoming the area of 1.2779-1.2801, it was already clear that there would be no flat, so the deal could be worked out, but it did not bring profit, it closed at a break-even stop loss. The next buy signal could have been executed, and it would have brought a profit of 30 pips. In general, the pair changed its direction of movement several times on Monday, which is always bad for intraday trading.   Trading tips on Tuesday: As seen on the 30M chart, the GBP/USD pair continues to form a new uptrend. The pound can still rise even on those days when there is no fundamental background. Therefore, purely technically, GBP may extend its upward movement, but fundamental factors are still very doubtful. The key levels on the 5M chart are 1.2538, 1.2597-1.2605, 1.2653, 1.2688, 1.2748, 1.2779-1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. On Tuesday, the UK will release reports on jobless claims, unemployment, and wages. In the US, Federal Reserve official James Bullard will speak. Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.     2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.     3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.     4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.     5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.     6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.    
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Navigating GBP/USD: Analyzing 5M Chart for Intraday Trading Success

InstaForex Analysis InstaForex Analysis 11.07.2023 09:26
5M chart of GBP/USD   The GBP/USD jumped solidly upwards on Monday, with volatility exceeding the 100-point mark. A speech by Bank of England governor Andrew Bailey was scheduled in the UK yesterday, but it was planned for the evening, so it couldn't have any influence on the pair's movement during the day. Nevertheless, in the second half of the day, the dollar slumped, which we can associate with the upcoming US inflation report, which already suggests a sharp slowdown to 3.1%. If the forecasts come true, then this report is already accounted for, and the likelihood of two more rate hikes in 2023 will drastically decrease. Theoretically, the broad US dollar weakness is logical, but let's also remember that this pattern is not always observed.   The market still uses any excuse to buy the pair. The momentum persists. There was only one entry point yesterday. At the beginning of the US session, the pair bounced off the 1.2762 level and the Kijun-sen line of the Ichimoku indicator, afterwards it rose to the 1.2863 level. The long position should have been closed manually closer to the evening, so the profit on it was about 70 points. An excellent trading day!   COT report:     The GBP/USD jumped solidly upwards on Monday, with volatility exceeding the 100-point mark. A speech by Bank of England governor Andrew Bailey was scheduled in the UK yesterday, but it was planned for the evening, so it couldn't have any influence on the pair's movement during the day. Nevertheless, in the second half of the day, the dollar slumped, which we can associate with the upcoming US inflation report, which already suggests a sharp slowdown to 3.1%.   If the forecasts come true, then this report is already accounted for, and the likelihood of two more rate hikes in 2023 will drastically decrease. Theoretically, the broad US dollar weakness is logical, but let's also remember that this pattern is not always observed. The market still uses any excuse to buy the pair. The momentum persists.   There was only one entry point yesterday. At the beginning of the US session, the pair bounced off the 1.2762 level and the Kijun-sen line of the Ichimoku indicator, afterwards it rose to the 1.2863 level. The long position should have been closed manually closer to the evening, so the profit on it was about 70 points. An excellent trading day!       In the 1-hour chart, GBP/USD maintains a bullish bias. The ascending trend line serves as a buy signal. So, traders are opening new long positions. However, the pound sterling is overbought. It is likely to decline in the medium term. Yet, it surpassed the descending trend line. Hence, it could move to new highs.   Yet, it surpassed the descending trend line. Hence, it could move to new highs. According to the technical analysis, the pound sterling has drivers for a further increase. And the market is happy to take any opportunity to sell the dollar. On July 11, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987. Senkou Span B (1.2714) and Kijun-sen (1.2719) lines can also provide signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips.   The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. On Tuesday, the UK will publish at least three reports that could stir some market reaction. Jobless claims, unemployment and payrolls. We believe that the unemployment data may have an impact on the traders' mood. If they turn out to be optimistic, the pound will receive a new opportunity to extend its upward movement. Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe.   They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.    
EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

UK Employment Falls, but Wage Growth Remains High; BoE Governor Bailey Signals More Rate Hikes Needed

Kenny Fisher Kenny Fisher 11.07.2023 14:06
UK employment falls but wage growth remains high BoE Governor Bailey says inflation will fall but more rate hikes needed The British pound has edged upward on Tuesday. In the European session, GBP/USD is trading at 1.2898, up 0.28%. The pound has put on an impressive rally, rising close to 200 pips against the dollar since Thursday.   UK employment softens, wages rise The UK delivered a mixed employment report for June. The economy created 102,000 jobs, far less than the 250,000 in May and shy of the consensus of 125,000. The unemployment rate rose from 3.8% to 4% and unemployment claims rose by 25,700, after a decline of 22,500 in May. However, wage growth excluding bonuses remained at 7.3% in the three months to May, above the consensus estimate of 7.1%. For Bank of England policymakers, the employment report is a good news/bad news release. The central bank needs the labour market to cool as it struggles to bring inflation down. To put it mildly, that battle has not gone as planned, with the OECD giving the UK the ignominious distinction of being the only major economy where inflation is rising. The June employment and unemployment numbers showed some cracks in the tight labour market, but wage growth, a key driver of inflation, remains stubbornly high. The takeaway from the jobs report is that the labour market is a bit less tight but wage growth remains inconsistent with the 2% inflation target and the BoE will have to continue to tighten policy. The cash rate is currently at 5.0% but the money markets have priced in a peak rate of 6.5%, which means that more pain is coming for businesses and households in the form of higher interest rates. BoE Governor Bailey is doing his best to put a brave face on a difficult situation. On Monday, Bailey said that inflation would fall “markedly” due to falling energy and food prices, but more rate hikes would be needed to bring inflation down from the current 8.7% to the 2% target.   GBP/USD Technical GBP/USD tested support at 1.2782 earlier today. The next support level is 1.2716 There is resistance at 1.2906 and 1.2972  
German Ifo Index Continues to Decline in September, Confirming Economic Stagnation

US CPI Set to Fall to 3%, Bank of Canada to Hike Again?

Michael Hewson Michael Hewson 12.07.2023 08:27
US CPI set to fall to 3%, Bank of Canada to hike again? By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets saw another positive session yesterday, rising for the third day in a row in anticipation that China's efforts to support its property sector may translate into further measures to support a rebound in economic activity. The FTSE100 once again underperformed as the strong pound and weakness in pharmaceuticals acted as a drag.  US markets also closed higher on optimism that today's CPI report wouldn't spring any unpleasant surprises. This positive finish looks set to see markets here in Europe open slightly higher in a couple of hours' time. US inflation appears to be heading in the right direction, after sliding to a 2-year low last month of 4%, from 4.9% in April. A year ago, US CPI hit its peak at 9.1%. Core prices have continued to look sticky slipping back to 5.3% from 5.5%, however the continued hawkishness of the Federal Reserve has seen the slide in yields that came about because of these numbers, reverse sharply. With another rate rise due later this month this week's CPI numbers won't impact how the Federal Reserve is likely to act in 2 weeks' time, but the numbers might shine a light in whether we can expect another rate hike in September. June CPI is expected to slow further to 3.1% and core prices to slow to 5%. Having decided to signal a pause in their recent rate hiking cycle when they hiked rates in January, the Bank of Canada surprised markets in June by deciding to hike rates again, by 25bps to 4.75%. The decision followed a similar decision by the RBA days before on concerns that inflation was proving to be much stickier than feared. The Bank of Canada also tweaked its guidance about the need for further rate hikes giving them more flexibility when it comes to raising rates or choosing to hold them. Any decision could well be tempered by the current business outlook which in Q2 fell to its lowest levels since Q3 of 2020, although last week's June jobs report was strong, which could prompt the central bank to hike again by another 25bps to 5%. Core inflation did slow to 3.9% in May from 4.3% in April but remains elevated, and with the Fed likely to hike in two weeks' time it's quite likely the BoC will want to get out in front of them.  The Japanese yen has been one of the big movers in recent days on speculation that the Bank of Japan may start to look at tweaking its yield curve control policy, when it next meets at the end of the month.         EUR/USD – looks set for a move towards the recent range highs at 1.1100. Support at 1.0970 as well as last week's lows at 1.0830. Below 1.0820 targets 1.0780.     GBP/USD – continues to move higher as we look to extend to fresh 15-month highs, and the 1.3010/20 area. A move through 1.3020 signals potential for 1.3200. Main support at 1.2680 area.       EUR/GBP – sliding towards the 0.8500 area, with a break below potentially targeting 0.8460. Resistance remains back at the highs this week at the 0.8570/80 area. We also have resistance at the 50-day SMA which is now at 0.8620.     USD/JPY – slipped below the 50-day SMA at 140 which was the next support for the US dollar and could well extend towards the 138.50 area and cloud support. Last weeks' weekly reversal suggests that a short-term top might be in. We need to see a move back above 142.80 to stabilise and argue for a return to 144.00.   FTSE100 is expected to open 17 points higher at 7,299     DAX is expected to open 55 points higher at 15,845     CAC40 is expected to open at 35 points higher 7,235  
GBP/USD Technical Analysis: Sideways Trend and Support Levels

GBP: Challenging the 1.30 Mark for Cable

ING Economics ING Economics 12.07.2023 09:23
GBP: 1.30 will be tough for cable Sterling and UK interest rate markets did eventually respond to the higher wage data yesterday. Today, the Bank of England has just released its Financial Policy Summary and Record. Headlines suggest large banks have passed stress tests while smaller lenders and shadow banks remain a concern though UK households with high debt will remain below their peak of 2007. At first glance, there seems nothing here to urgently constrain the BoE's monetary tightening plans. US CPI will determine whether GBP/USD dramatically trades through 1.3000 - there is an outside risk to 1.33 should we see a November 22-style move in the dollar. But it is probably better to stay cautious here and after a good rally so far this month, 1.30 could be difficult to break. EUR/GBP has broken to a new low - but again 0.8500 might provide some psychological support.
The Pound's Rally at Risk: GBP/USD Faces Bearish Reversal Pattern

The Pound's Rally at Risk: GBP/USD Faces Bearish Reversal Pattern

Ed Moya Ed Moya 12.07.2023 09:54
GBP/USD GBP/USD (4-hour chat) has been in a general rally for the past two days, but that could be coming to an end if a bearish butterfly pattern forms. The headlines have been mostly bullish for the pound, but that could be reaching an inflection point. Inflation is forcing the BOE to be extremely hawkish and that could soon lead to a significant economic downturn.  Many traders are focusing on today’s UK wage growth, as it posted the biggest rise outside the pandemic period, but jumps in jobless claims suggest the labor market is cooling. If the pound-dollar bullish trend respects the psychological 1.3000 resistance, some bullish bets might get taken down.  The four-hour GBP/USD is displaying a potential bearish butterfly pattern.  If this technical reversal pattern holds, a moderate decline could see downward momentum target the 1.2800 region. If a dramatic move triggers a rally above the 1.3000 level, the bearish reversal pattern could be invalidated.  Further upside targets include the 1.3250 region.  
GBP/USD Eyes Further Gains as Pound Advances Against Dollar

GBP/USD Analysis: Higher Timeframes Signal Potential Delay in Rise, Bulls Dominate on Lower Timeframes

InstaForex Analysis InstaForex Analysis 12.07.2023 13:39
GBP/USD Higher timeframes Yesterday, on the daily chart, the pound crossed the lower border of the monthly cloud (1.2893). This is an important monthly level, so it may yet have its influence and, thanks to the force of attraction, delay the continuation of the rise. If the bulls maintain activity, the upper border of the monthly cloud (1.3142) serves as their next target in this area.     H4 - H1 On lower timeframes, the bulls are developing an upward trend movement, having a clear advantage. It should be noted that during trend movement, corrective declines are as natural as rises. At the moment, we observe a corrective slowdown around 1.2957 (first resistance of the classic pivot points). Further upward targets within the day are R2 (1.2986) and R3 (1.3038). In case the current correction deepens, the chart on lower timeframes suggests the following levels as supports today: 1.2905 (central pivot point) - 1.2876 (S1) - 1.2824 (S2) - 1.2806 (weekly long-term trend). *** The technical analysis of the situation uses: Higher timeframes - Ichimoku Kinko Hyo (9.26.52) + Fibo Kijun levels Lower timeframes - H1 - Pivot Points (classic) + Moving Average 120 (weekly long-term trend)    
Market Analysis: EUR/USD Signals and Trends

GBP/USD Analysis: Sell Signal Triggers Price Decrease, Market Awaits US CPI Data

InstaForex Analysis InstaForex Analysis 12.07.2023 13:43
The test of 1.2942, coinciding with the decline of the MACD line from zero, prompted a sell signal that led to a price decrease of around 20 pips. The latest CPI data in the US lies ahead, and this will likely cause market players to review their positions on risky assets. Demand for pound may drop, which could lead to a decline in GBP/USD. There will be an increase only when inflation drops more than expected. Markets will also pay attention to the speeches of FOMC members Neel Kashkari and Raphael Bostic.   For long positions: Buy when pound hits 1.2946 (green line on the chart) and take profit at the price of 1.3014 (thicker green line on the chart). Further growth will be seen in the case of weak US inflation data. However, when buying, make sure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2895, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2946 and 1.3014.     For short positions: Sell when pound reaches 1.2895 (red line on the chart) and take profit at the price of 1.2844. Pressure will increase in the event of further growth in US inflation. However, when selling, make sure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2946, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2895 and 1.2844.         What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market     Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.  
GBP/USD Analysis: GBP Maintains Growth Momentum, Market Awaits US Inflation Report

GBP/USD Analysis: GBP Maintains Growth Momentum, Market Awaits US Inflation Report

InstaForex Analysis InstaForex Analysis 12.07.2023 13:47
On the hourly chart, the GBP/USD pair on Tuesday secured above the next corrective level of 127.2% (1.2917). Thus, the growth process can continue toward the next corrective level of 161.8% (1.3007). A level of 1.3000 can be considered a psychological mark, and such levels usually attract price. In other words, traders may subconsciously strive for such marks. The pair's consolidation below the level of 1.2917 will work in favor of the US dollar, and some fall toward the level of 1.2847. The waves are now painting us the same picture as with the euro.   Each peak of the next wave is higher than the previous one, and each low - is higher than the previous one. Thus, there are no prerequisites for a change in traders' sentiment to "bearish." However, the most important report of this week will be released today, so the market reaction can be strong and unexpected. The pound rose in the first two days of the week, although the grounds for purchases were quite dubious. For example, yesterday's unemployment reports in the UK showed a deterioration, and the pound could show a decline.   But traders have already focused on US inflation, which could drop to 3.1% in June. This value has already been factored in, but what if the report shows a different result? In this case, we are waiting for a move that will depend on the side of the deviation from the forecast. If the consumer price index turns out to be above 3.1%, then a decline in the pair can be expected. If below - new growth. The level of 1.3000 can be worked out a bit later, not today. Today the probability of a decline is higher. However, this does not mean traders' sentiment will change to "bearish."   On the 4-hour chart, the pair has rebounded from the level of 1.2745 and consolidated above the level of 1.2860. Thus, the growth of quotes can continue towards the next level of 1.3044. A "bearish" divergence is brewing at the CCI indicator, which may indicate the beginning of forming a "bearish" wave on the hourly chart. There are no sell signals now, and the pound ignores the news background, which should have led to its decline.   Commitments of Traders (COT) Report: During the previous reporting week, there was a shift in the "Non-commercial" traders' sentiment, which turned somewhat less "bullish." The count of long contracts held by speculators fell by 7,921 units, while the short contracts saw a decrease of 6,192. Despite this, the predominant sentiment among the major players remains distinctly "bullish," with a marked difference between long and short contracts: 96 thousand to 46 thousand. The pound has a favorable outlook for further growth, particularly as the current news environment lends it more support than the dollar. Nevertheless, anticipating a strong surge in the value of the pound sterling is increasingly challenging. The market is overlooking several factors that favor the dollar, and expectations of continual interest rate increases from the Bank of England primarily drive the pound's growth.     Here's the upcoming news schedule for the US and UK: US - Consumer Price Index (CPI) (12:30 UTC). US - "Beige Book" (18:00 UTC).   For Wednesday, the economic event calendar includes one report and one event. The "Beige Book," an aggregation of economic reports from various US regions, doesn't generally significantly influence the market. However, the inflation report may substantially sway traders' sentiments. As for the GBP/USD forecast and trading advice: Minimal selling of the pound during the "bullish" trend is possible. For instance, a rebound from the 1.3007 mark on the hourly chart with a target of 1.2917 or a closure below the 1.2917 level aiming for 1.2847 could be considered. New purchases could be advisable upon a rebound from the 1.2917 level on the hourly chart, aiming for 1.3007. However, movements in the latter half of the day may be considerable and vary in direction.  
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

GBP Gains in Cable, EUR/GBP Remains Sideways

ING Economics ING Economics 13.07.2023 08:53
GBP: Cable up, EUR/GBP sideways We are seeing a lot of correlation in short-dated yields around the world, where yesterday's soft US CPI data saw 22bp taken out of the Bank of England tightening cycle for early next year. The main takeaway from yesterday's Bank of England financial stability and subsequent communication appeared to be that consumers and businesses could withstand higher interest rates - were they to materialise. In addition, today's release of May UK GDP data has emerged marginally better than expected.  In some ways, sterling has already enjoyed its re-rating on the very hawkish BoE and thus may not outperform in this current dollar bear phase. However, many investors will now be targeting a move to 1.3300 in GBP/USD - assuming we can close the week above 1.30.  EUR/GBP has reversed off a low near 0.8500 - which now may mark the lower end of the trading range for this quarter
Summer's End: An Anxious Outlook for the Global Economy

US Dollar Faces Worst Weekly Decline Since November Amid Disinflation Concerns

Michael Hewson Michael Hewson 14.07.2023 08:26
US dollar set to post its worst weekly decline since November By Michael Hewson (Chief Market Analyst at CMC Markets UK)   If we could sum up the catalyst behind this week's market price action, it can probably be summed up in a single word, disinflation.   Starting with Chinese inflation numbers on Monday, to US CPI on Wednesday, and US PPI on Thursday, all this week's inflation numbers have pointed to one overarching theme, that of rapidly slowing prices, which has had markets pricing in the prospect that this month's Federal Reserve rate hike is likely to be the last one for a while.     Unsurprisingly this has prompted a sharp decline in global yields, a big selloff in the US dollar, as well as giving equity markets a real boost in a complete reversal from the gloom of last week, with the Nasdaq 100 and S&P500 rising to their highest levels since January 2022.     European markets have also undergone a decent rebound on the basis that the multiple rate hikes that investors had been pricing in from the ECB and the Bank of England may now not happen. That doesn't mean we won't see these central banks hike again, it's still very likely that the ECB will hike by 25bps this month and the Bank of England at the start of August. It is what comes after that which has started to become a lot less clear.     UK GDP numbers for May, were encouraging, despite showing a contraction due to the extra Bank Holiday, coming in better than forecast with the pound managing to post another daily gain, putting in its best run of gains this year, and reinforcing its position as the best performing G10 currency this year.     Yesterday's UK data also showed that the services sector performed better than expected, coming in at 0%, showing that despite the challenges currently facing the economy it has continued to hold up reasonably well. This would suggest that the Bank of England still has room to push rates up further with 25bps already priced in for August and potentially 50bps if next week's CPI doesn't show a material slowing. Judging by the current trends around global inflation the feeling is that UK inflation could start to fall rapidly by the end of Q3.     The slide in the US dollar this week has been astonishing, and with the Federal Reserve set to go into a blackout period tomorrow, ahead of its next meeting, there has been little sign that this week's data has swayed the FOMC's stance when it comes to their view that further multiple rate hikes are likely to be needed between now and the end of the year. The problem now is the market isn't buying it, with 2-year yields retreating sharply, as markets price in a goldilocks scenario of slowing prices and a resilient labour market.         Today's only economic numbers of note are US import and export prices for June, which are expected to reinforce the deflationary narrative of this week's data, with both month on month and annual numbers all expected to come in negative for the second month in succession.   We'll also be getting the latest University of Michigan sentiment numbers for July, which have up until recently been market movers when it comes to forward inflation expectations. After this week's CPI and PPI numbers they probably won't get the same level of attention.   On the earnings front the focus will be on the release of the Q2 numbers for JPMorgan Chase, Citigroup and Wells Fargo, and their respective views of the health of the US consumer, and how much they set plan to aside in additional provisions. Their guidance on how they see the US economy in Q3 is also likely to be crucial.     EUR/USD – surged through this year's previous peaks, and rising to its highest level since February 2022, the euro looks on course to test the 1.1500 area and the 2022 highs. The 1.1100 area should now act as support.     GBP/USD – having broken above the 1.3020 area, the pound should now head towards the 1.3300 area and March 2022 highs. Support remains a long way back at the 1.3020 area, and below that at 1.2850.        EUR/GBP – failed at the 0.8570/80 area yesterday as it continues to ping between this area of resistance and the lows this week at 0.8500/10.     USD/JPY – looks set to push lower as we move into the cloud support area with next support at the 200-day SMA at 137.20, and below that at 135.70. Resistance now comes in at the 140.20 area and 50-day SMA.     FTSE100 is expected to open 12 points lower at 7,428     DAX is expected to open 15 points lower at 16,126     CAC40 is expected to open 7 points lower at 7,362  
Anticipating a Strong Rebound for AUD: Evaluating Australia's Monetary Outlook

GBP/USD: Hawkish BoE Supports GBP/USD Ascendancy

ING Economics ING Economics 14.07.2023 15:22
GBP/USD: Hawkish BoE keeps GBP/USD in the ascendancy   The Bank of England’s (BoE) surprise 50bp rate hike in June caught markets by surprise. That was partly a function of the BoE’s policy to avoid much market communication. Some argued that sterling should fall because it made the chances of a UK hard landing all the greater. We argued that very inverted yield curves are often quite positive for G10 currencies. From here, we can see GBP/USD moving towards the 1.33 area near term. But GBP is subject to the same forces that recently sunk the dollar – e.g. a soft inflation print could hurt. At the moment we look for two more BoE rate hikes – policy rate to 5.50% – but well below the 6%+ rates priced by the markets.  
The ECB's Rate Hike: EUR/USD Rally in Question

Falling Demand for US Currency: Analyzing the Factors Behind the Dollar's Decline and its Impact on Euro and Pound

InstaForex Analysis InstaForex Analysis 14.07.2023 16:20
Not only is the demand for the US currency decreasing, it's practically falling every day. The EUR/USD pair increased by 220 points this week, the GBP/USD pair by 270, if calculated from the week's opening point. At first glance, it may seem that the dollar losses are not frightening, but it continues to fall even when there are no reasons for it to do so. We are all used to the idea that market movements rely on economic data, daily events that help determine direction within each day. Sometimes there are strong background events, thanks to which one or another currency can grow every day, but this growth is not expressed in three-digit numbers.     Having analyzed the situation again, I came to the conclusion that the dollar's problem may lie in rapidly falling inflation. If inflation has already dropped to 3%, then the Federal Reserve has no need to continue policy-tightening in 2023. Perhaps there will be another "control shot" at consumer prices, and the rate will rise to 5.5%. But that's it.   The second point - if inflation is approaching the Fed's target, then monetary easing may begin as early as 2023. In the case of the European Central Bank and the Bank of England, if the rate does finish rising in the coming months, it is not possible to talk about policy easing in the context of the near-term perspective. In my opinion, this is a rather dubious explanation for the falling demand for the US currency, but there is no other! The ECB and the BoE will sooner or later also cease tightening and move to easing, and this time may come even sooner than it seems now.   After all, in the UK and the EU the question of recession remains open. US GDP grows by 2-3% each quarter, whereas in Europe and the UK, growth has been absent for several quarters. And the higher the rate goes, the more "negative" economic growth will be. And I believe this factor should also be taken into account. Based on all of the above, the euro and pound can extend its upward movement for some time. This can be explained as the "final impulse" of the market, which understands that it has placed both instruments in overbought territory. However, it's impossible to predict when most market participants will decide to take profits and close long positions. I believe that now it is necessary to carefully monitor the situation and try to respond to it as quickly as possible.   There aren't really any other options. Both wave markings allow for a build-up of a descending set of waves, but we know that any wave structure can be complicated. And the current news background provides no help or benefit. There were plenty of weak economic reports from the EU and Britain this week.   Based on the analysis conducted, I conclude that the uptrend build-up is still in progress, but it can end at any moment. I believe that targets around 1.0500-1.0600 are quite realistic, and I advise selling the instrument with these targets. However, now we need to wait for the completion of the a-b-c structure, and afterwards we can expect the pair to fall into this area. Buying is quite risky. The euro uses any opportunity to rise, but the news background for the dollar is not as weak as it may seem. The wave pattern of the GBP/USD pair suggests the formation of an upward set of waves. Earlier, I advised buying the instrument in case of a failed attempt to break through the 1.2615 mark, which is equivalent to 127.2% Fibonacci, and then open long positions while aiming for targets around the 1.3084 mark, which corresponds to 200.0% Fibonacci. Now all targets have been achieved, but a successful attempt to break through 1.3084 can lead to a new momentum with targets located around 1.3478 (261.8% Fibonacci).  
The American Dollar's Unyielding Strength Amidst Market Surprises and Economic Divergence

GBP/USD Analysis: Pound Faces Test of Descending Price Channel Amidst Bearish Pressure

InstaForex Analysis InstaForex Analysis 17.07.2023 10:10
GBP/USD On Friday, the British pound fell by 42 pips. The signal line of the Marlin oscillator has turned downwards, and the upper band of the descending price channel in green remains untested. Now the question arises - if the pound decides to reverse (or deep correction), will it proceed to test the price channel? The pound tends to test key levels, so it can rise to 1.3180. Price consolidation below 1.3034 will lower such probability.     Bringing the price back to the initial level of speculative growth at 1.2666 on July 6th, when US private sector employment data from ADP was released, will be a challenging task - a four-figure move lies ahead with strong intermediate levels (1.2847, 1.2720). It is possible that the price will reach the designated area in the first week of August (the Federal Reserve's rate decision will be on July 26th, and the Bank of England's meeting will be on August 3rd).     On the 4-hour chart, the Marlin oscillator has come close to bearish territory. Marlin encourages the price to overcome 1.3034 in the near term, but further difficulties may arise, the nearest one is the MACD line (1.2907). The rapid decline of Marlin carries the risk of divergence, in which case the price may rise towards the upper band of the daily chart's price channel.    
AUD Faces Dual Challenges: US CPI Data and Australian Labor Market Statistics

GBP/USD Analysis: Friday's Trades on 30M Chart - Flat Market and Sideways Movement

InstaForex Analysis InstaForex Analysis 17.07.2023 10:26
Analyzing Friday's trades: GBP/USD on 30M chart     On Friday, the GBP/USD pair traded flat with a slight bearish bias. The new, upcoming, ascending trend line has not been broken. At the moment, the price has only tested it. However, since the market has entered a flat phase, breaking this trend line will not be a strong signal for a trend reversal.   Of course, the British currency cannot continue to rise indefinitely, especially considering the lack of reasons and grounds for such a move. A correction should start sooner or later, but it is extremely difficult to predict when it will start because the market is currently hardly reacting to fundamental and macroeconomic factors, as confirmed by the entire week.   There was only one report on Friday, and it was the consumer sentiment from the University of Michigan in the US. This indicator unexpectedly showed a much stronger increase than forecasted and... triggered a 20-25 point rise in the dollar. As before, all reports in favor of the dollar were ignored, while any reason to buy the British pound was used to its fullest extent, resulting in a 200% increase.   GBP/USD on 5M chart A huge number of signals materialized on the 5M chart, while the movement was sideways and volatility was only 55 pips, which is very low for the pound. Therefore, almost any level that the price encountered automatically became a source of false signals. Thus, beginners could attempt to execute one or two signals during the European trading session. It is highly likely that the first one resulted in a small loss, while the second one was closed at breakeven when the stop loss was triggered. It was quite challenging to expect other results in a flat market. Trading tips on Monday: As seen on the 30M chart, the GBP/USD pair continues to show strong growth despite the Friday flat. Even if the price consolidates below the trend line, it does not mean that a downtrend is brewing, as traders remain bullish, and crossing the trend line during a flat phase is not a strong signal. The key levels on the 5M chart are 1.2779-1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043, 1.3107, 1.3145, 1.3210, 1.3241, 1.3272. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven.   On Monday, there are no important events lined up in the UK or the US, but it is extremely difficult to predict the price movement in conditions of extreme overbought levels and without any news. It could be a correction, a continuation of the rise, or a flat market.     Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.
US Retail Sales Mixed, UK Inflation Expected to Ease: Impact on GBP/USD and Monetary Policy

US Retail Sales Mixed, UK Inflation Expected to Ease: Impact on GBP/USD and Monetary Policy

Kenny Fisher Kenny Fisher 19.07.2023 08:21
US retail sales dip, core retail sales rise UK inflation expected to fall The British pound has edged lower on Tuesday. In the North American session, GBP/USD is trading at 1.3038, down 0.27%.     UK inflation expected to fall The UK is lagging behind other major economies in the fight to curb inflation. Will Wednesday’s inflation report bring some good news? In May, CPI remained stuck at 8.7% y/y but is expected to ease to 8.2% in June. The core rate is expected to remain steady at 7.1%. On a monthly basis, headline CPI is expected to fall from 0.7% to 0.4% and the core rate is projected to slow to 0.4%, down from 0.8%. The inflation report could be a game-changer with regard to the Bank of  England’s meeting on August 3rd. The BoE delivered an oversize 50-basis point hike in June and will have to decide between a modest 25-bp hike or another 50-bp increase at the August meeting. Last week’s employment report pointed to wage growth picking up, which moved the dial in favour of a 50-bp increase.   US retail sales report a mixed bag US retail sales for June provided a mixed spending picture. Headline retail sales rose just 0.2% m/m, below the 0.5% consensus estimate and the upwardly revised May reading of 0.5%. Core retail sales were much stronger at 0.6%, above the 0.3% consensus and the upwardly revised May release of 0.3%. The data points to resilience in consumer spending although momentum has slowed. The retail sales report did not change expectations with regard to rate policy, with the Fed expected to raise rates in July and take a pause in September. The Fed has tightened by some 500 basis points in the current rate-hike cycle and this has curbed inflation, which has fallen to 3%. Nevertheless, the Fed remains concerned that the solid US economy and a tight labour market will make it difficult to hit the 2% inflation target, and the Fed hasn’t given any hints that it will wrap up its tightening in July, although the money markets appear to think this is the case.   GBP/USD Technical GBP/USD has support at 1.2995 and 1.2906  There is resistance at 1.3077 and 1.3116    
GBP Inflation Surprise: Pound Faces Downward Pressure as Rate Hike Expectations Shift

GBP Inflation Surprise: Pound Faces Downward Pressure as Rate Hike Expectations Shift

ING Economics ING Economics 19.07.2023 10:08
GBP: Good news on inflation, bad news for the pound Lately, we have been pointing at the pound’s vulnerable position. Markets' aggressive tightening expectations required data to offer no hints of abating price pressures and an overstretched positioning (on the long-end). It appeared that some long positions had been scaled back already ahead of this morning’s key CPI release, with the pound underperforming in the G10 space yesterday. Looking at the June figures released this morning, there is finally some encouraging news for the Bank of England. Headline inflation slid back below 7.9% (below consensus), illustrating a 0.4% MoM increase which has been the slowest seen since early 2022. We know that the BoE is mostly focused on service inflation, and there was good news here too – a decline from 7.4% to 7.2%, contrary to the BoE’s expectations. The question now is whether this is enough to tilt the balance to a 25bp hike in August. We are inclined to think so, even though it remains a close call. The post-CPI Sonia curve looks significantly changed, with 36bp priced in for August and 90bp to the peak, which marks a huge 55bp shift since last week. In FX, the pound is under pressure, down around 0.70% against the dollar. We suspect there is more room to fall in GBP/USD, especially if our expectations for some dollar support into the FOMC prove to be correct. A move to the 1.2800 area in Cable looks possible even before the BoE meeting. EUR/GBP has spiked, but we suspect markets may like some bullish narrative on the euro side beyond the 0.8700 level, and that may not come just yet if the ECB turns fully data-dependent and the eurozone outlook remains lacklustre at best.
AUD Faces Dual Challenges: US CPI Data and Australian Labor Market Statistics

GBP Faces Re-pricing Pressure amid BoE Rate Cycle Shift and Fed Meeting Expectations

ING Economics ING Economics 24.07.2023 10:23
GBP: BoE re-pricing might have come far enough for the time being Sterling has been under pressure over the last week on the back of the re-pricing of the Bank of England (BoE) rate cycle. Here, expectations for the Bank Rate at the end of this year have dropped from a 6.35% peak to now 'just' 5.88%. Given the lack of top-tier UK data this week and what could be a slightly hawkish Fed meeting on Wednesday, it may well be that the repricing of the BoE rate cycle and sterling softness have come far enough for the time being. This could see EUR/GBP correct back towards the 0.8600 area. GBP/USD could correct to the 1.2670/2700 area this week if the dollar correction does run a little further on the Fed story.
US CPI Surprises on the Upside, but Fed Expectations Unchanged Amid Rising Recession Risks

British Pound Extends Losses as UK Manufacturing and Services PMIs Decline

Ed Moya Ed Moya 25.07.2023 08:58
British pound extends losses UK manufacturing and services PMIs decline in July The British pound continues to lose ground. In the North American session, GBP/USD is trading at 1.2822, down 0.23%. The pound has been on a nasty slide, losing over 300 points since July 14th.   UK manufacturing and services PMIs ease in July The week started on a sour note, as the UK manufacturing and services PMIs both slowed in July. Manufacturing fell to 45.0, below the June reading of 46.5 and the consensus estimate of 46.1 points. The manufacturing sector has now declined for 12 straight months and today’s release marked the PMI’s lowest level this year. Services slipped to 51.5, down from 53.7 and shy of the consensus of 52.4 points. This marked a 6-month low and pointed to weaker growth in business activity, which has been a key driver of the economy. It’s a very light data calendar in the UK, with no other tier-1 releases this week. Still, it could be a busy week for GBP/USD, with the Federal Reserve decision on Wednesday and US GDP on Thursday.   Fed expected to hike on Wednesday The Federal Reserve meets on Wednesday and the money markets have priced in a 0.25% hike as a near certainty and are heavily leaning towards a pause in September. This stance may be out of sync with the Fed, as Jerome Powell and other members have voiced concern that inflation isn’t falling fast enough and that could be a hint at further rate hikes after July. With the economy performing well and the labour market remaining tight, an argument can be made that the Fed has a golden opportunity to keep tightening in order to push inflation back to the 2% target. There have been concerns about whether the Fed can guide the economy to a soft landing, but the economic data is looking good and the chances of a major recession are low.   GBP/USD Technical GBP/USD tested resistance at 1.2858 earlier. Next, there is resistance at 1.2932  There is support at 1.2757 and 1.2637  
CHF/JPY Hits Fresh All-Time High in Strong Bullish Uptrend

Fed Set to Raise Rates to a 22-Year High Amidst Cautiously Positive Market Sentiment

Michael Hewson Michael Hewson 26.07.2023 08:18
Fed set to raise rates to a 22 year high   European markets have seen a cautiously positive start to the week, buoyed by hopes of further stimulus measures from Chinese authorities in the wake of recent poor economic data. The FTSE100 has been a key beneficiary of this, putting in a two-month high yesterday.   The modest improvement in sentiment has also been helped in some part by the recent retreat in short term yields which is being driven by the hope that central banks won't have to hike rates as aggressively as thought a few weeks ago. Both German and UK 2-year yields have fallen sharply from their highs this month on this basis, helped by inflation which appears to be slowing more quickly than expected.     US markets have also put together a strong run of gains with the Dow and S&P500 hitting their highest levels since April 2022, on the back of optimism that the start of this week's earnings numbers will live up to the high expectations place on them.   Last night's initial reaction to the numbers from Microsoft, and Google owner Alphabet would suggest that optimism might be justified against a backdrop of a still resilient US economy, and a Federal Reserve that looks set to be close to the end of its rate hiking cycle.           Today's expected 25bps Fed rate hike, after last month's pause, looks set to be the last rate rise this year, whatever Fed policymakers would have you believe.   We may hear officials try and make the case for at least one more between now and the end of the year but given recent trends around US inflation its quite likely that PPI will go negative in July.   While Powell will try and make the case for further rate hikes, his time would be better spent in making the case for rates remaining higher for longer, and projecting when the FOMC expected the 2% target to be met. Core prices remain too high even with headline CPI at 3%, and it is here that the Fed will likely focus its and the market's attention.     If headline CPI continues to fall in the way, it has been doing the Fed will struggle to convince the markets that it would continue hiking rates against such a backdrop.   As things stand markets are already pricing in the prospect that this will be the last rate rise in the current hiking cycle given recent declines in the US dollar and US yields. With the next Fed meeting coming in September the market will have to absorb two more inflation reports and two more jobs' reports. Nonetheless the Fed will be keen to prevent the market pricing in rate cuts which was one of the key challenges earlier this year.   With inflation slowing and the jobs market resilient the US economy is currently in a bit of a goldilocks moment. This will be the challenge for Powell today, as he tries to steer the market into believing that the Fed could hike rates some more. We also shouldn't forget that we will get fresh messaging at the end of August at the Jackson Hole annual symposium.     EUR/USD – retreated from the 1.1275 area which is 61.8% retracement of the 1.2350/0.9535 down move, with the next key support at the 1.0980 level.  Currently have resistance at the 1.1120 area.   GBP/USD – appears to have found a base at 1.2795/00, breaking a run of 7 daily losses. While above the 50-day SMA the uptrend from the March lows remains intact with the next resistance at the 1.3020 area.     EUR/GBP – last week's failure at the 0.8700 area has seen the euro slip back, with the risk that we could revisit the recent lows at 0.8500/10.   USD/JPY – the rebound from the 200-day SMA at 137.20, appears to have run out of steam at the 142.00 area, however the bias remains for a move lower while below the recent highs of 145.00.   FTSE100 is expected to open 10 points lower at 7,681   DAX is expected to open 25 points higher at 16,236   CAC40 is expected to open 35 points lower at 7,380  
Key Economic Events and Corporate Earnings Reports for the Week Ahead – September 5-9, 2023

ECB Set to Follow the Fed with 25bps Rate Hike as European Markets Look to React

ING Economics ING Economics 28.07.2023 08:25
ECB set to follow the Fed and raise rates by 25bps   European markets underwent a disappointing session yesterday, while US markets also underperformed after the Federal Reserve raised interest rates by 25bps as expected, pushing them to their highest level in over 20 years. At the ensuing press conference chairman Powell reiterated his comments from June, that additional rate rises will depend on incoming data.     In the statement it was restated that inflation remained elevated, and that the committee was highly attentive to the risks that prices might remain high. Powell was non-committal on whether the Fed would raise rates again in September, merely restating that if the data warranted the central bank would do so. US yields finished the day mixed, as did US stocks with little in the way of surprises from last night's meeting, as we look ahead to today's ECB rate meeting. If the Fed is close to the end of its rate hiking cycle which appears to be looking increasingly likely, despite Powell's determination to keep markets guessing, the pressure on the ECB to be more aggressive in its own battle against inflation, is also looking as if it might recede.     We've already seen the euro rise sharply against the US dollar in the last few weeks, which is deflationary and will help. Furthermore, factory gate prices in German and Italy have been in freefall for months now, so while core CPI has remained sticky and close to record highs at 5.5%, it's also important to remember that the ECB has pushed rates from 2% to 4% this year already.     We expect to see another 25bps later today, however the consensus that was so prevalent at the start of this year of more aggressive rate hikes is already starting to fray on the governing council, with Stournaras of the Bank of Greece pushing back strongly against the idea of more aggressive action.     He hasn't been the only one however, and we've also started to see more vocal political opposition to further tightening from Italian Prime Minister Giorgia Meloni who has been publicly critical of the ECB when it comes to recent rate hikes. If, as expected last nights Fed hike is the last one then it is entirely feasible that the ECB could similarly be close to the end of its own rate hiking cycle.     EUR/USD – we've seen a modest rebound from levels just above the 1.1000 level, having retreated from the 1.1275 area which is 61.8% retracement of the 1.2350/0.9535 down move.  A break below 1.0980 could see a move towards 1.0850. Currently have resistance at the 1.1120 area.     GBP/USD – continues to pull away from the recent lows at 1.2795/00, having broken a run of 7 daily losses. While above the 50-day SMA the uptrend from the March lows remains intact with the next resistance at the 1.3020 area.         EUR/GBP – continues to look soft with support remaining at the recent lows at 0.8500/10. Resistance currently at the 0.8600 and the highs last week at 0.8700/10.     USD/JPY – continues to drift down away from the 142.00 area, with support at 139.70. A move below 139.50 opens up the risk of a move back towards the 200-day SMA at 137.20.     FTSE100 is expected to open 18 points higher at 7,695     DAX is expected to open 52 points higher at 16,183 CAC40 is expected to open 35 points higher at 7,350
The Commodities Feed: Stronger Oil Prices Boost US Oil Production and Supply

Yen Moves Higher as Bank of Japan Considers Yield Curve Control Tweak

ING Economics ING Economics 28.07.2023 08:37
Yen moves higher as Bank of Japan tweaks YCC By Michael Hewson (Chief Market Analyst at CMC Markets UK) European markets saw a strong session yesterday, buoyed by the belief that the central banks could be done when it comes to further rate hikes, after the ECB followed the Fed by raising rates by 25bps and then suggesting that a pause might be on the table when they next meet in September. The mood was also helped by a strong set of US economic numbers which pointed to a goldilocks scenario for the US economy.     US markets also opened strongly with the S&P500 pushing above the 4,600 level and its highest level since March 2022, before retreating and closing sharply lower, with the Dow closing lower, breaking a run of 13 days of gains. Sentiment abruptly changed during the US session on reports that the Bank of Japan might look at a possible "tweak" to its yield curve control policy at its latest policy meeting earlier this morning.     This report, coming only hours before today's scheduled meeting, caught markets on the hop somewhat pushing the Japanese yen higher against the US dollar, while pushing US 10-year yields back above 4%. With Japanese core inflation above 4% there was always the possibility that the Bank of Japan might spring a surprise, or at least lay the groundwork for a possible tweak. The Bank of Japan has form for when it comes to wrong footing the market, and so it has proved, as at today's meeting they announced that they would allow the upper limit on the 10-year yield to move from 0.5% to 1%. They would do this by offering to purchase JGBs at 1% every day through fixed rate operations, effectively raising the current cap by 50bps, and sending the yen sharply higher. The central bank also raised its 2023 inflation forecast to 2.5% from 1.8%, while nudging its 2024 forecast lower to 1.9%.     As far as today's price action is concerned, the late decline in the US looks set to translate into a weaker European open, even though confidence is growing that the Fed is more or less done when it comes to its rate hiking cycle. Nonetheless, investors will be looking for further evidence of this with the latest core PCE deflator, as well as personal spending and income data for June, later this afternoon to support the idea of weaker inflation. Anything other than a PCE Core Deflator slowdown to 4.2% from 4.6%, could keep the prospect of a 25bps September hike on the table for a few weeks more. Both personal spending and income data are expected to improve to 0.4% and 0.5% respectively.     We're also expecting a tidal wave of European GDP and inflation numbers, which are expected to confirm a weaker economic performance than was the case in Q1, starting with France Q2 GDP which is expected to slow to 0.1% from 0.2%. The Spanish economy is also expected to slow from 0.6% to 0.4% in Q2. On the inflation front we'll be getting an early look at the latest inflation numbers for June from France and Germany as well as PPI numbers for Italy. France flash CPI for June is expected to slow to 5.1% from 5.3%, while Germany CPI is expected to slow to 6.6% from 6.8%. With PPI inflation acting as a leading indicator for weaker inflation for all of this year the latest Italy PPI numbers will be scrutinised for further weakness in the wake of a decline of -3.1% in May on a month-on-month basis and a -6.8% decline on a year-on-year basis.       EUR/USD – failed to follow through above the 1.1120 area, subsequently slipping back, falling below the 1.1000 area, which could see a retest of the 1.0850 area which is the lows of the last 2 weeks. Below 1.0850 targets a move back to the June lows at 1.0660.   GBP/USD – slipped back from the 1.3000 area, falling back below the Monday lows with the risk we could retest the 50-day SMA and trend line support at the 1.2710. While above this key support the uptrend from the March lows remains intact.       EUR/GBP – struggling to rally, with resistance at the 0.8600 area, and support at the recent lows at 0.8500/10. Above the 0.8600 area targets the highs last week at 0.8700/10.   USD/JPY – while below the 142.00 area, the bias remains for a move lower, with the move below 139.70 targeting a potential move towards the 200-day SMA at 137.20.   FTSE100 is expected to open 24 points lower at 7,668   DAX is expected to open 38 points lower at 16,368   CAC40 is expected to open 20 points lower at 7,445
Turbulent Times Ahead: Poland's Central Bank Signals Easing Measures

Analysis and Trading Tips for GBP/USD: Navigating Market Signals and Key Levels

InstaForex Analysis InstaForex Analysis 28.07.2023 15:50
Analysis of transactions and tips for trading GBP/USD Further decline became limited as the test of 1.2940, which happened on Thursday afternoon, coincided with the sharp drop of the MACD line from zero. No other market signal appeared for the rest of the day. Strong GDP data from the US triggered a massive sell-off in GBP/USD, which may continue today if similar positive statistics about the US economy come out. Market players will also not see any reason to buy pound during the European session.     For long positions: Buy when pound hits 1.2822 (green line on the chart) and take profit at the price of 1.2870 (thicker green line on the chart). An upward correction may occur briefly during the weekend.   However, when buying, ensure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2774, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2822 and 1.2870. For short positions: Sell when pound reaches 1.2774 (red line on the chart) and take profit at the price of 1.2706 Pressure will persist in the case of unsuccessful attempts to break through the daily high.   However, when selling, ensure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2822, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2774 and 1.2706.     What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely.   Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market Important: Novice traders need to be very careful when making decisions about entering the market.   Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.   And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.    
CHF/JPY Hits Fresh All-Time High in Strong Bullish Uptrend

EU Inflation Slows in July Amid Economic Uncertainty: ECB's 'Pause' Considered

Michael Hewson Michael Hewson 31.07.2023 15:50
EU inflation set to slow further in July Last week saw another positive week for markets in Europe, the third in a row with the FTSE100 pushing up to a 2-month high before slipping back, while the DAX managed to close at a new record high, despite the German economy stagnating in Q2.     With price pressures in Germany and the US showing signs of slowing more than expected in the last couple of months there is a sense that last week's rate hikes by the Federal Reserve and the ECB may well have been their last. We've heard several ECB policymakers expressing increasing caution over the growth outlook, which appears to be tempering enthusiasm for more aggressive rate action, while some US policymakers are becoming more optimistic about the glide path for inflation, with Minneapolis Fed President Neel Kashkari commenting at the weekend that the US could avoid a recession, although he was careful not to sound too dovish.   For now, stock markets appear to be buying into a soft-landing narrative when it comes to the US economy, with US markets closing higher for the 3rd week in a row with the Dow, S&P500 and Nasdaq 100 all posting their highest weekly closes since January 2022.     As we come to the end of another positive month for both US and European markets there is still little sign of the sharp move lower that many have been expecting over the last few months. This so-called "wall of worry" that has characterised most of the gains since the big March sell-off has thus far shown little sign of coming to end, despite bond yields which have as yet remained close to their highest levels since 2007. Even Friday's move by the Bank of Japan in tweaking its yield curve control policy failed to have a lasting impact, with the yen finishing the day lower, after losing ground initially, although yields on JGB's did hit their highest levels in 9 years. The US dollar also had another positive week rallying for the 2nd week in a row, benefitting largely due to the US economy's ability to withstand the higher rates that have been pushed through by the Federal Reserve over the last 16 months.   With the ECB indicating that a "pause" might be coming when the governing council next meets in September, today's latest flash EU CPI for July could go further in reinforcing that narrative after Friday's slowdown in German inflation. Headline CPI is expected to slow to 5.3% from 5.5%, while core prices are forecast to slow to 5.4%.     On the growth front EU Q2 GDP is expected to move back into positive territory to 0.2%, after two negative quarters. It's also a big week for the pound with Thursday's Bank of England rate meeting, where we can expect to see another rate hike of 25bps at the very least, with an outside chance of a 50bps move. Markets are still expecting a much higher terminal rate for the BOE, well above the current 5%, although it is now well off the peaks of a few weeks ago when it was well above 6%. Even at current estimates of just below 6%, it still seems way too high.   Much could depend on the strength of today's consumer credit and mortgage lending data for June which is expected to show further weakness. Mortgage approvals are expected to slip back below 50k to 49k, while net consumer credit is forecast to remain steady at £1.1bn. Given current levels of wage growth a hold from the Bank of England is unlikely, even if many people think they should pause. If the Bank of England is sensible this week, they will temper any reaction to over-react and we will probably see a hawkish hike of 25bps, given the uncertainty ahead of the July CPI numbers which are due 16th August. Current expectations are for a sharp slowdown which in turn could future rate expectations fall further.     This week also has the July Friday's US payrolls report to look forward to along with a whole host of US labour market data with the ADP report also in focus after June's bumper 497k number, as well as June JOLTs job openings.        EUR/USD – found support at the 1.0940 area last week with further support at the 50-day SMA as well as the 1.0850 area. Resistance currently at last week's high at 1.1150. GBP/USD – slipped back from the 1.3000 area, last week with next support at trend line support at 1.2710, and the 50-day SMA at 1.2700. While above this key support the uptrend from the March lows remains intact.     EUR/GBP – struggling to rally, finding resistance at the 0.8600 area, with the risk of a return to the recent lows at 0.8500/10. Above the 0.8600 area targets the July highs at 0.8700/10. USD/JPY – Friday's rebound from the 138.00 area and cloud support could extend back towards the 142.00 area. While below the bias remains for a move lower, however a move back through 142.20 could trigger a move back to the 145.00 area. FTSE100 is expected to open 30 points lower at 7,664 DAX is expected to open 32 points lower at 16,437 CAC40 is expected to open 14 points lower at 7,462  
ECB Meeting Uncertainty: Rate Hike or Pause, Market Positions Reflect Tension

Manufacturing PMIs and RBA Rates in Focus: European and US Markets Show Resilience

Michael Hewson Michael Hewson 01.08.2023 10:14
Manufacturing PMIs in focus, as RBA keeps rates unchanged     European markets finished the month of July on a rather subdued note, even allowing for another month of solid gains, although we did see another new record high for the DAX, while the CAC 40 posted a record monthly close. The euro Stoxx 50 also posted its highest monthly finish since October 2007. Both the FTSE100 and FTSE250 also fared reasonably well, with the FTSE100 closing at a 2-month high, helped by a rebound in house builders on the back of easing interest rate rise expectations. US markets also started the final day of July on the front foot before slipping back from their intraday highs, on the back of some end of month profit taking, drawing a line under a 5th successive month of gains. While there is a growing degree of confidence that last week's rate hikes from the Federal Reserve and the European Central Bank might be the prelude to a lengthy pause, there is rising realisation that rates may well have to stay at current levels for quite a while yet.     Nonetheless, despite this apprehension Asia markets have seen a positive session, despite weaker Chinese PMI numbers and this looks set to translate into a modestly positive start for markets in Europe this morning. This week we can expect the Bank of England to follow suit with another rate hike of its own, while this morning the RBA took the decision to keep rates unchanged at 4.1%. The decision was finely balanced with many expecting a rate hike, however the Australian central bank appears to have erred on the side of caution, given last week's weaker than expected Q2 CPI reading, and the weakness in recent PMI numbers.     The RBA went on to alter their inflation forecast to predict that prices would return to target in late 2025, while also revising up their GDP growth targets for this year and next year. The central bank did keep the door open to further hikes in the future. The Australian dollar slid back giving up some of the gains it made yesterday, while the ASX200 pushed back up towards its recent highs.     Today's economic agenda shifts the focus back to the weakness of the manufacturing sector, as well as the resilience of the US labour market, as we look to a flat open. In Germany especially, the performance of the manufacturing sector has been dire with July manufacturing PMI expected to be confirmed at 38.8, the lowest level since the manufacturing sector was shut down due to Covid. In France, manufacturing PMI is expected to slow to 44.5, while only modest improvements are expected in Spain and Italy of 48.3 and 44.3. The UK manufacturing numbers are expected to slow to 45, from 46.5.     Even the US economy hasn't managed to escape the manufacturing slump with the latest ISM manufacturing survey for July expected to show a modest improvement from 46 to 46.9, with prices paid expected to see a modest improvement to 44, from 41.8. It is clear that the manufacturing sector is experiencing a clear deflationary impulse which is likely to continue to act as a drag on prices in the coming months. The bigger question is whether this translates into a similar drag on the services sector, and here prices are proving to be slightly stickier.     One major concern to the slowing prices narrative has been the recent gains in oil prices, which yesterday saw their biggest monthly gain in over a year, over concerns that Saudi Arabia will go further and extend their production cuts into September. This rise in prices over the last 4 weeks is already feeding into higher prices at the fuel pumps, which if sustained could impact on consumer demand in the coming weeks.      We also get an insight into the US labour market with the latest JOLTS job openings numbers for June which are expected to show a fall from 9.82m vacancies to 9.6m, which would be a 2-year low. While such a move would be welcome it's also important to remember that vacancies are still over 2m higher than they were at their pre-pandemic peaks, back in mid-2018. This number needs to come down a lot further before we can infer that the falls in vacancies might lead to a moderation in wage growth.     EUR/USD – currently have support at the 1.0940 lows from last week with further support at the 50-day SMA as well as the 1.0850 area. Resistance currently at last week's high at 1.1150.     GBP/USD – support currently at the 1.2750 area as well as trend line support from the March lows at 1.2710, and the 50-day SMA at 1.2700. While above this key support the uptrend from the March lows remains intact. Resistance at the 1.3000 area.         EUR/GBP – currently range trading between resistance at the 0.8600 area, with the risk of a return to the recent lows at 0.8500/10. Above the 0.8600 area targets the July highs at 0.8700/10.     USD/JPY – broken above the 142.00 area, opening up the risk of a move back to the previous peaks at 145.00. We need to see a move back above 142.60 for this to unfold. Support comes in at yesterday's lows at 140.70.     FTSE100 is expected to open 3 points higher at 7,702     DAX is expected to open 13 points higher at 16,459     CAC40 is expected to open 5 points higher at 7,502     By Michael Hewson (Chief Market Analyst at CMC Markets UK)
Key Economic Events and Corporate Earnings Reports for the Week Ahead – September 5-9, 2023

GBP/USD: Pound Shows Slight Decline, Marlin Oscillator Prepares for Potential Advance

InstaForex Analysis InstaForex Analysis 01.08.2023 13:41
GBP/USD Pound declined slightly on Monday, which kept the Marlin oscillator in a downward direction. However, it seems to be preparing to overcome the balance indicator line (in red) this morning, most likely aiming to advance towards the first target at 1.2720.     If the price manages to consolidate below this level, it will break through the MACD line (in blue) and move towards the June 29 low at 1.2590.   On the four-hour chart, the pair trades below the lower boundary of the range (1.2839) and the balance indicator line, shifting the short-term trend towards selling. The Marlin oscillator also moved into negative territory, indicating a bearish trend. In the event of an unexpected breakout above the upper boundary of the range (1.2903), the price increase could be stopped by the MACD line (1.2937)  
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

European Markets React to US Rating Downgrade and Economic Concerns

Michael Hewson Michael Hewson 02.08.2023 08:22
European markets set to open lower after US rating downgrade     We saw a negative start to August for European markets with the DAX leading the way lower, having only put in a new record high the day before, after poor manufacturing PMIs and disappointing earnings prompted profit taking.   Yesterday's weakness appears to have been prompted by concern that the economy is a little bit weaker than perhaps people would like, raising concern for earnings growth heading into the second half of the year. US markets also finished the day lower, although closing well off the lows of the day with the Dow managing to eke out a gain. US yields also finished the day higher, on the rising realisation that rates may well have to stay at current levels for quite a while yet.     This profit taking has continued overnight after Fitch downgraded the US credit rating to AA+ from AAA, while simultaneously boosting demand for haven assets, with Asia markets falling sharply, and which looks set to translate into a sharply lower European open.   The increase in crude oil prices over the past 4 weeks is also raising concern that the falls in input prices that we've seen over the last few months might start to hit a floor and start rising again. Yesterday we got another snapshot of the US labour market as US job openings (JOLTS) fell to their lowest levels since April 2021, although they are still well above the levels, they were pre-pandemic. The latest employment component in the July ISM manufacturing survey also slowed to its lowest level since July 2020.     Today we get the latest insight into private sector hiring with the ADP employment report for July which is unlikely to repeat the bumper 497k seen in the June numbers. We should also be prepared for a downward revision to that report with July expected to see a more moderate 190k, as we look towards Friday's more important non-farm payrolls numbers. While stocks slipped back yesterday the US dollar rose to a 3-week high, gaining ground across the board on the grounds of the broader resilience of the US economy.     EUR/USD – still finding support at the 1.0940 lows from last week with further support at the 50-day SMA as well as the 1.0850 area. Resistance currently at last week's high at 1.1150.     GBP/USD – has continued to slide lower towards trend line support from the March lows at 1.2710, and the 50-day SMA at 1.2700. While above this key support the uptrend from the March lows remains intact. Resistance at the 1.3000 area.         EUR/GBP – popped briefly above the resistance at the 0.8600 area, before slipping back again, with the risk of a return to the recent lows at 0.8500/10. We need to see a concerted move above 0.8620 to target the July highs at 0.8700/10.     USD/JPY – continues to move through the 142.00 area, with the next target at the previous peaks at 145.00. Support comes in at this week's lows at 140.70.     FTSE100 is expected to open 30 points lower at 7,636     DAX is expected to open 88 points lower at 16,152     CAC40 is expected to open 36 points lower at 7,370   By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
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European Markets React to US Rating Downgrade and Economic Concerns - 02.08.2023

Michael Hewson Michael Hewson 02.08.2023 08:22
European markets set to open lower after US rating downgrade     We saw a negative start to August for European markets with the DAX leading the way lower, having only put in a new record high the day before, after poor manufacturing PMIs and disappointing earnings prompted profit taking.   Yesterday's weakness appears to have been prompted by concern that the economy is a little bit weaker than perhaps people would like, raising concern for earnings growth heading into the second half of the year. US markets also finished the day lower, although closing well off the lows of the day with the Dow managing to eke out a gain. US yields also finished the day higher, on the rising realisation that rates may well have to stay at current levels for quite a while yet.     This profit taking has continued overnight after Fitch downgraded the US credit rating to AA+ from AAA, while simultaneously boosting demand for haven assets, with Asia markets falling sharply, and which looks set to translate into a sharply lower European open.   The increase in crude oil prices over the past 4 weeks is also raising concern that the falls in input prices that we've seen over the last few months might start to hit a floor and start rising again. Yesterday we got another snapshot of the US labour market as US job openings (JOLTS) fell to their lowest levels since April 2021, although they are still well above the levels, they were pre-pandemic. The latest employment component in the July ISM manufacturing survey also slowed to its lowest level since July 2020.     Today we get the latest insight into private sector hiring with the ADP employment report for July which is unlikely to repeat the bumper 497k seen in the June numbers. We should also be prepared for a downward revision to that report with July expected to see a more moderate 190k, as we look towards Friday's more important non-farm payrolls numbers. While stocks slipped back yesterday the US dollar rose to a 3-week high, gaining ground across the board on the grounds of the broader resilience of the US economy.     EUR/USD – still finding support at the 1.0940 lows from last week with further support at the 50-day SMA as well as the 1.0850 area. Resistance currently at last week's high at 1.1150.     GBP/USD – has continued to slide lower towards trend line support from the March lows at 1.2710, and the 50-day SMA at 1.2700. While above this key support the uptrend from the March lows remains intact. Resistance at the 1.3000 area.         EUR/GBP – popped briefly above the resistance at the 0.8600 area, before slipping back again, with the risk of a return to the recent lows at 0.8500/10. We need to see a concerted move above 0.8620 to target the July highs at 0.8700/10.     USD/JPY – continues to move through the 142.00 area, with the next target at the previous peaks at 145.00. Support comes in at this week's lows at 140.70.     FTSE100 is expected to open 30 points lower at 7,636     DAX is expected to open 88 points lower at 16,152     CAC40 is expected to open 36 points lower at 7,370   By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
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Bank of England Poised to Raise Rates to a 15-Year High Amid Economic Concerns

ING Economics ING Economics 03.08.2023 10:13
Bank of England set to raises rates to a new 15 year high European markets underwent another negative session yesterday, clobbered by concerns over weaker than expected economic activity, which in turn is raising concern for earnings growth heading into the second half of the year. Throw in a US credit rating downgrade from Fitch and the catalyst for further profit taking after recent record highs for the DAX completed the circle of negativity.     US markets also underwent a negative session, with the Nasdaq 100 undergoing its worst session since February, while the US dollar acted as a haven and the yield curve steepened. As a result of the continued sell-off in the US, and weakness in Asia markets, European markets look set to open lower later today, and while the Fitch downgrade doesn't tell us anything about the US political governance that we don't already know investors appear to be looking to test the extent of the downside in the market.     Earlier this week we saw some poor manufacturing PMI numbers which showed that the European economy was very much in recession, with disinflation very much front and centre. This has raised questions as to whether the services sector will eventually succumb to similar weakness. There has been some evidence of that in recent readings but by and large services activity has been reasonably robust. In Spain services activity is expected to remain steady at 53.4, along with Italy at 52.2. The recent flash numbers from France saw further weakness to 47.4, while in Germany we can expect to see a resilient 52, down from 54.1.         EU PPI for June is expected to slip further into deflation to -3.2% year on year. In the UK services activity is expected to slow to 51.5 from 53.7. With inflation unexpectedly slowing more than expected in June to 7.9% it could be argued that the pressure on the Bank of England to hike by another 50bps has eased somewhat, especially since the Fed and the ECB both hiked by 25bps last week.     Having seen core CPI slow by more than expected to 6.9% forward rate expectations have eased quite markedly in the past few weeks. Forward market expectations of where the terminal rate is likely to be, have slipped from 6.5%, to below 6%. It's also likely that inflation for July will slow even more markedly as the effects of the energy price cap get adjusted lower which might suggest there is an argument that we might be close to the end of the current rate hiking cycle.     The fly in the ointment for the Bank of England is the rather thorny issue of wage growth which has moved above core CPI, and could prompt the MPC to err towards the hawkish side of monetary policy and raise rates by 50bps, with a view to suggesting that this could signal a pause over the coming weeks as the central bank gets set to consider how quickly inflation falls back over the course of Q3. Such an aggressive move would be a mistake given that a lot of the pass-through effects of previous rate increases haven't fully filtered down with some suggesting that the Bank of England should pause. In the current environment this seems unlikely given a 25bps is priced in already.       In a nutshell we can expect to see a hawkish 25bps as a bare minimum, and we could also see a split with some pushing for 50bps. We could also get an insight into how new MPC member Megan Greene views the current situation when it comes to casting her vote. One thing seems certain, she is unlikely to be dovish as Tenreyro whom she replaced on the MPC.     We'll also get a further insight into the US labour market after another bumper ADP payrolls report yesterday which saw another 324k jobs added in July. Weekly jobless claims are expected to come in at 225k, while we'll also get an insight into the services sector with the ISM services index for July which is expected to come in at 53. The employment component will be of particular interest, coming in at 53.1 in June, having jumped from 49.2 in May.       EUR/USD – managed to hold above the 50-day SMA for the time being, with a break below targeting further losses towards 1.0830. Resistance currently at last week's high at 1.1150.     GBP/USD – also flirting with the 50-day SMA with a clean break targeting a move towards the 1.2600 area.  Resistance at the 1.2830 area as well as 1.3000.         EUR/GBP – continues to edge higher drifting up to the 0.8630 level before slipping back, although it is now finding some support at the 0.8580 area. We need to see a concerted move above 0.8620 to target the July highs at 0.8700/10.     USD/JPY – continues to look well supported above the 142.00 area, with the next target at the previous peaks at 145.00. Support comes in at this week's lows at 140.70.     FTSE100 is expected to open 10 points lower at 7,551     DAX is expected to open 22 points lower at 15,998     CAC40 is expected to open 15 points lower at 7,297   By Michael Hewson (Chief Market Analyst at CMC Markets UK)  
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Bank of England Keeps Options Open After Smaller Rate Hike on Better Inflation News

ING Economics ING Economics 03.08.2023 15:02
Bank of England opts for smaller rate hike after better inflation news The Bank of England is keeping all its options open on future rate hikes, although another rise in September seems highly likely. Whether that's repeated in November is a more open question, particularly if services inflation starts to fall more noticeably between now an.   Bank of England reverts back to a 25bp hike Better news on inflation has, as expected, enabled the Bank of England to pivot back to a 25 basis-point rate hike this month. That follows a more aggressive 50bp hike back in June. Policymakers clearly don’t want to come across as complacent though, and there are plenty of references to the upside risks associated with inflation, as well as the recent surprises in wage growth. We shouldn’t be too surprised then that the Bank isn’t offering up much on what it intends to do next. The BoE retained its forward guidance that says it could hike again if “evidence of more persistent pressures” shows up in the inflation figures. This is the same phrase it has used all year and is sufficiently vague to keep various options on the table for September and beyond. That said, there are a few hints that we might be nearing the top for policy rates. Interestingly, the Bank now formally says that policy is restrictive, which seems to be a new addition to the statement – as is the line about policy needing to stay “sufficiently restrictive for sufficiently long”. At a pinch, you could argue this is the Bank laying very early groundwork for a pause later in the year, though we’re at risk of overanalysing. Meanwhile the new forecasts, even accounting for the Bank’s upside skew that it applies to what its models are churning out, show inflation at (or even a tad below) target in a couple of years’ time. Curiously, that’s also the case under the assumption that Bank Rate stays unchanged at its new level over the coming months. That said, the Bank’s forecasts have been pointing to sub-target inflation for some time now, and policymakers don’t appear to be putting a lot of faith in what their models are currently predicting.   So what next? Another hike in September seems likely, but by November we think the news on services inflation and wage growth should be looking a little better. The former has risen in no small part because of higher energy bills, and, according to ONS surveys, the pressure on service sector companies to aggressively raise prices is abating. Whether or not we get another 25bp hike in November will therefore largely depend on whether services inflation has failed to slow, but our base case for now is that 5.50% in September will mark the peak for Bank Rate. Market pricing of a peak at 5.65% around the turn of the year therefore seems fair – and certainly much more reasonable than it did just a few weeks ago when investors briefly saw peak Bank Rate near 6.5%.   UK markets read the statement on the less hawkish side Today’s MPC statement and accompanying material have seen sterling sell-off around 0.5% and the UK 2-10 year Gilt curve steepen by around 7-8bps, led by declining yields at the short end of the curve. As above, investors seem to have read something in either the statement or the CPI forecasts suggesting that the Bank Rate may not need to be hiked as high as 5.75% after all. As discussed in our BoE preview, we expect the general direction of travel for EUR/GBP to lie towards the 0.88 area later this year as evidence builds that rates may in fact peak at 5.50%. We still like a higher GBP/USD on the back of the softer dollar story – but that does rely on both US inflation and activity showing a marked deceleration over the coming months. We currently see GBP/USD ending the year just above 1.30. Gilt price action today comes amid unsettled conditions at the long end of the US Treasury market.  A steeper curve does seem to make the most sense, if investors do continue to question whether the Bank Rate makes it to 5.75% and also while the US fiscal situation, plus rising Japanese government bond yields, keep the long end of core bond markets under pressure. Currently, we have a year-end 10-year Gilt target of 3.80% – but that requires a lot of things to go right.
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Late Friday US Sell-Off to Impact European Open: Market Analysis

Michael Hewson Michael Hewson 07.08.2023 08:44
Late Friday US sell-off set to weigh on European open    By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets managed to eke out some modest gains on Friday, at the end of what was a negative week overall as concerns over earnings guidance downgrades and rising long term yields weighed on broader market sentiment. A mixed US jobs report looked to have stabilised sentiment, pulling the DAX and FTSE100 off their lows of the week after another slowdown in jobs growth in July and downward revisions to previous months, spoke to the idea that central bank rate hikes have done their job, and that no more are coming. This uplift only lasted until just after European markets had closed with all the signs that US markets would be able to end a 3-day losing streak, however the early gains that we saw in the early part of the day soon evaporated with the Nasdaq 100 and S&P500 both posting their worst weekly performances since March.     In essence there was something for everyone in Friday's jobs report, weaker jobs growth, the unemployment rate inching lower, and robust wage growth. Ultimately it spoke to a resilient US economy, as well as a possible Fed pause in September, ahead of this week's CPI report, although there are some on the FOMC who are still on the "more rate hikes to come" line. One of these members is Governor Michelle Bowman who at the weekend expressed her view that more rate hikes were likely to be needed to return inflation to target. While this may now be starting to become a minority view on the FOMC, it merely serves to highlight the growing uncertainty that is not only starting to permeate central bank thinking but also investor sentiment more broadly, as well as raising broader questions. Has the Fed managed to engineer a soft landing, and should they cause a pause to allow more time to assess any lag effects on consumers as well as the broader economy. Or do they carry on hiking on the basis that we could have seen a short-term base when it comes to prices slowing down? While markets are still pricing in a 40% chance of one more rate hike before the end of the year, this figure could swing either way in the event of a hot CPI print later this week. If next month's jobs report is of a similar "goldilocks" variety then a pause seems the most likely outcome from the next Fed rate decision. Whichever way we go with the data in the coming weeks, a pause still seems the most plausible outcome. For the most part bond markets drove most of the price action in financial markets last week with sharp increases in longer term yields, despite the sharp falls on Friday, as the yield curve steepened sharply. Yields could be the main driver this week with the US set to issue $103bn across a range of maturities this week, in the wake of last week's credit rating downgrade by Fitch.   It's also worth keeping an eye on this week's China trade data for July, due tomorrow, and inflation date on Wednesday, against a backdrop of an economy that appears to be struggling with weak domestic demand, and where economic activity has been struggling. We also have preliminary Q2 GDP economic numbers for the UK at the end of the week as well as industrial and manufacturing production numbers for June.       EUR/USD – rallying off last week's lows just above the 1.0900 area, closing above the 50-day SMA in the process we need to see a move back above 1.1050 to have any chance of revisiting the July peaks at 1.1150.   GBP/USD – drifted down the 1.2620 area last week before rebounding strongly, but we need to see a back above the 1.2800 area to ensure this rally has legs. Below 1.2600 targets 1.2400. Resistance at the 1.2830 area as well as 1.3000.     EUR/GBP – feels like it wants to retest the 100-day SMA at 0.8680, having drifted back from the 0.8655 area last week. Support now comes in at the 0.8580 area, with the bias for a retest of the July highs at 0.8700/10. Below 0.8580 retargets the 0.8530 area.   USD/JPY – failed just below the 144.00 area last week, and has now slid back below the 142.00 area, which brings a move towards the 140.70 area into focus. Main resistance remains at the previous peaks at 145.00.   FTSE100 is expected to open 31 points lower at 7,533   DAX is expected to open 54 points lower at 15,898   CAC40 is expected to open 29 points lower at 7,296
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GBP/USD Trading Analysis and Tips: Navigating Price Swings

ING Economics ING Economics 07.08.2023 09:38
Analysis of transactions and tips for trading GBP/USD The test of 1.2720 on Friday afternoon, coinciding with the rise of the MACD line from zero, prompted a buy signal that led to a price increase of around 50 pips.   Weak data on the US labor market led to a sharp rise in GBP/USD. However, this did not last long, as already during today's Asian session, the pair fell, compensating for most of Friday's growth. In addition, buyers should not expect much today because only good data on the UK housing price index and confident defense of the level of 1.2705 will there be chances of a rally. For long positions: Buy when pound hits 1.2736 (green line on the chart) and take profit at the price of 1.2772 (thicker green line on the chart). Growth may occur. However, when buying, ensure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2705, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2736 and 1.2772. For short positions: Sell when pound reaches 1.2705 (red line on the chart) and take profit at the price of 1.2673. Pressure will increase with weak data and inactivity around 1.2705. However, when selling, ensure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2736, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2705 and 1.2673.   What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market   Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.   And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.    
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Analysis and Trading Tips for GBP/USD: Navigating Volatility and Signals

InstaForex Analysis InstaForex Analysis 07.08.2023 09:45
Analysis of transactions and tips for trading GBP/USD The test of 1.2720 on Friday afternoon, coinciding with the rise of the MACD line from zero, prompted a buy signal that led to a price increase of around 50 pips.     Weak data on the US labor market led to a sharp rise in GBP/USD. However, this did not last long, as already during today's Asian session, the pair fell, compensating for most of Friday's growth. In addition, buyers should not expect much today because only good data on the UK housing price index and confident defense of the level of 1.2705 will there be chances of a rally. For long positions: Buy when pound hits 1.2736 (green line on the chart) and take profit at the price of 1.2772 (thicker green line on the chart). Growth may occur. However, when buying, ensure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2705, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2736 and 1.2772. For short positions: Sell when pound reaches 1.2705 (red line on the chart) and take profit at the price of 1.2673. Pressure will increase with weak data and inactivity around 1.2705. However, when selling, ensure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2736, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2705 and 1.2673.   What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market   Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.    
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GBP/USD Analysis and Trading Signals: Short-Term and Hourly Perspectives

InstaForex Analysis InstaForex Analysis 07.08.2023 10:25
Analysis of GBP/USD 5M   On Friday, the pound sterling corrected higher after the release of US data. There were three reports, two of which were simply ignored by the market. The decline in the unemployment rate did not save the US dollar from falling, as the market only considered the NonFarm Payrolls, which came in lower than forecast, and the value of the previous month got revised lower.   Therefore, there were grounds for the dollar to fall on Friday. In the UK, there were no important reports or events. The US dollar fell by approximately 105 pips from the daily lows, but if we look at the opening and closing prices of the day, its losses were only 40 pips, and at that moment, they were almost negated. We believe that the pound has no grounds to resume the uptrend.   The trading signals for the pound were almost identical to those for the euro. Traders could use the bounce from the level of 1.2693 to open long positions. Subsequently, the pair broke through the area of 1.2746-1.2762, and it remained above it until the end of the trading session. As a result, the long position could be closed anywhere above the mentioned area, and the profit amounted to at least 70 pips.   COT report: According to the latest report, the non-commercial group of traders closed 13,300 long positions and 3,800 short ones. Thus, the net position of non-commercial traders fell by almost 10,000 positions in a week. But in general, it is still rising. The net position has been steadily growing over the past 10 months as well as the pound sterling. Now, the net position has advanced markedly. This is why the pair will hardly maintain its bullish momentum. I believe that a long and protracted downward movement should begin. COT reports signal a slight growth of the British currency but it will not be able to rise in the long term.   There are no drivers for opening new long positions and not many technical signals for short positions either. The British currency has already grown by a total of 2,800 pips, from its absolute lows reached last year, which is a significant increase. Without a downward correction, the continuation of the uptrend will be illogical. However, there has been no logic in the pair's movements for quite some time. The market perceives the fundamental background one-sidedly, ignoring any data in favor of the dollar. The Non-commercial group of traders has opened 92,100 long positions and 42,600 short ones. I remain skeptical about the long-term growth of the pound sterling but speculators continue to buy and the pair continues to rise.   Analysis of GBP/USD 1H     On the 1H chart, the pound/dollar pair has started to correct, but has not yet broken the downtrend. Consolidation below the critical line may signal a resumption of the downward movement. We believe that there are no grounds for the sterling's growth, so we expect the decline to resume. Of course, that doesn't mean that the pair will fall every day. Periods of consolidation, flat movements, and corrections are possible. On August 7, traders should pay attention to the following key levels: 1.2520, 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2868) and Kijun-sen (1.2734) lines can also be sources of signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. On Monday, there are no important events or reports lined up in the UK and the US, except for perhaps Michelle Bowman's speech. However, it's a bit of a stretch to consider this event important. Therefore, we expect calm movements akin to a flat.   Description of the chart: Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals; The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals; Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals; Yellow lines are trend lines, trend channels, and any other technical patterns; Indicator 1 on the COT charts is the net position size for each category of traders; Indicator 2 on the COT charts is the net position size for the Non-commercial group.  
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Europe Braces for Lower Open After Strong US Session; China Trade Data Disappoints

Michael Hewson Michael Hewson 08.08.2023 08:43
Europe set for lower open after strong US session, China trade disappoints   By Michael Hewson (Chief Market Analyst at CMC Markets UK)   It was a rather subdued start to the trading week in Europe yesterday with little in the way of positive drivers although we managed to hold on most of the rebound that we saw on Friday in the wake of the July jobs report out of the US. US markets on the other hand enjoyed a much more robust start to the week, ending a 4-day decline and reversing the losses of the previous two sessions, as bargain hunters returned.   The focus this week is on Thursday's inflation numbers from the US, which could show that prices edged up in July, however it is the numbers out of China tomorrow which might be more instructive in respect of longer-term trends for prices, if headline CPI follows the PPI numbers into deflation.       Earlier this morning the latest China trade numbers for July continued to point to weak economic activity and subdued domestic demand. The last 2 months of Q2 saw sharp declines in exports, with a -12.4% fall in June. There was little let-up in this morning's July numbers with a bigger than expected decline of -14.5%, the worst performance since February 2020, with global demand remaining weak. Imports have been little better, with negative numbers every month this year, and July has been no different with a decline of -12.4%, an even worse performance from June's -6.8%, with all sectors of the economy showing weakness. With numbers this poor it surely can't be too long before Chinese policymakers take further steps to support their economy with further easing measures, however, there appears to be some reluctance to do so at any scale for the moment, due to concerns over capital outflows.     Today's European market open was set to be a modestly positive one, until the release of the China trade numbers, however we now look set for a slightly lower open, with the only data of note the final German CPI numbers for July which are set to show that headline inflation slowed modestly to 6.5% from 6.8% in June.   It's also set to be another important week for the pound ahead of Q2 GDP numberswhich are due on Friday. Before that we got a decent insight into UK retail sales spending earlier this morning with the release of two important insights into consumer behaviour in July.   The BRC retail sales numbers for July showed that like for like sales slowed during the month, rising 1.8%, well below the 3-month average of 3.3%. Food sales performed particularly well, but at the expense of online sales of non-food items like clothes which showed a sharp slowdown.     It is clear that consumers are spending their money much more carefully and spending only when necessary, as Bank of England rate hikes continue to bite on incomes. With some consumers approaching a cliff edge as their fixed rate terms come up for expiry, they may well be saving more in order to mitigate the impact of an impending sharp rise in mortgage costs. That said in a separate survey from Barclaycard, spending on entertainment saw a big boost of 15.8% even as clothing sales declined.     Bars, pubs, and clubs saw a pickup in spending as did the entertainment sector as Taylor Swift did for July, what Beyonce did for May. The release of a big slate of summer films may also have offered a boost with the latest Indiana Jones film, along with Mission Impossible Dead Reckoning, Barbie and Oppenheimer prompting people to venture out given the wetter weather during the month.       EUR/USD – not much in the way of price action yesterday although the euro managed to hold onto most of the rally off last week's lows just above the 1.0900 area. We currently have resistance at the 1.1050 area which we need to break to have any chance of revisiting the July peaks at 1.1150.     GBP/USD – another solid day yesterday after the rebound off the 1.2620 area last week. We need to see a move back above the 1.2800 area to ensure this rally has legs. Below 1.2600 targets 1.2400. Resistance at the 1.2830 area as well as 1.3000.         EUR/GBP – struggling to rally beyond the 0.8650 area but we need to see a move below the 0.8580 area to signal a short-term top might be in and see a return to the 0.8530 area. Also have resistance at the 100-day SMA at 0.8680.     USD/JPY – failed just below the 144.00 area last week but has rebounded from the 141.50 area. While below the 144.00 area the risk is for a move towards the 140.70 area. Main resistance remains at the previous peaks at 145.00.       FTSE100 is expected to open 8 points lower at 7,546     DAX is expected to open 16 points lower at 15,936     CAC40 is expected to open unchanged at 7,319      
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Analyzing Monday's Trades: GBP/USD on 30M Chart

InstaForex Analysis InstaForex Analysis 08.08.2023 12:09
Analyzing Monday's trades: GBP/USD on 30M chart     The GBP/USD pair tried to extend its upward movement on Monday, but this was in the absence of influential economic releases so it failed. In addition to that, the US reports from Friday were not weak enough for the dollar to fall further on Monday. Sterling does not have any reason to rise, and the USD does not have any reason to fall either. If it starts a corrective movement, it should be weak and slow. If the pound surges, it may indicate the resumption of the global uptrend, which, from our perspective, is completely illogical. Therefore, we are expecting a correction, followed by a decline. This week, there will be very few important events. The only noteworthy ones are the UK's GDP report for the second quarter and the US inflation report.   GBP/USD on 5M chart   On Monday, several trading signals were formed on the 5-minute chart. The break below the level of 1.2748 occurred overnight, but traders could have opened a short position once the European session started, as the price had not moved far from the formation point by that time. The pound fell by about 20 pips, so the Stop Loss should have been set to breakeven. The second buy signal was formed at the beginning of the US session, around the same level. In this case, the pair moved 25 pips in the right direction. That's what beginners could have gained on Monday. It was a low-volatility day for the pound. Trading tips on Tuesday: On the 30-minute chart, the GBP/USD pair broke the short-term downtrend. Now, the pound may correct higher, but we shouldn't expect a strong uptrend. We expect the pound to fall, as we still believe it is overbought and unreasonably expensive. The key levels on the 5M chart are 1.2538, 1.2597-1.2605, 1.2653, 1.2688, 1.2748, 1.2791-1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Monday, there are no important events or reports lined up in the US and the UK, so we should brace ourselves for another low-volatility day with no trends. The pair may continue its slow upward movement within the corrective phase.     Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.   2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.   3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.   4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.   5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.   6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.     How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.      
Economic Calendar Details and Trading Analysis - August 7 & 8

Economic Calendar Details and Trading Analysis - August 7 & 8

InstaForex Analysis InstaForex Analysis 08.08.2023 12:21
Details of the economic calendar on August 7 Monday was traditionally accompanied by an empty macroeconomic calendar. Important statistical data in the European Union, the United Kingdom, and the United States were not published.   Analysis of trading charts from August 7 The EUR/USD exchange rate dropped below the 1.1000 level again, indicating a prevailing bearish sentiment in the market. It should be noted that the current movement is characterized as a correction from the medium-term trend peak. Regarding the GBP/USD, the slowing growth rate may also indicate a prevailing bearish sentiment among market participants. It's important to highlight that, according to tactical analysis, there's a three-week corrective move from the local peak of the medium-term trend, during which a slight pullback has occurred. Essentially, the euro and the British pound continue to decline relative to the U.S. dollar, and the current movement can be seen as a temporary deviation from the main trend.   Economic calendar for August 8 The speeches by several representatives of the U.S. Federal Reserve System are of particular interest today, as it is expected that no significant economic indicators will be published. EUR/USD trading plan for August 8 If the euro against the U.S. dollar consistently stays below the 1.1000 level, it may lead to an increase in short positions and a further drop to 1.0900. However, if the price holds above the 1.1050 level, traders will consider a bullish scenario. In that case, a subsequent recovery phase of the euro rate is possible, which may conclude the current market correction.   GBP/USD trading plan for August 8 If the quote remains stable below the 1.2700 level, the bearish scenario becomes relevant within the correction framework. This will lead to an increase in short positions and possibly an update of the correction's low. At the same time, a bullish scenario implies a gradual recovery in the value of the British pound relative to the ongoing correction. A primary technical signal for a bullish scenario might emerge if the price holds above the 1.2800 level during the day.     What's on the charts The candlestick chart type is white and black graphic rectangles with lines above and below. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time frame: opening price, closing price, intraday high and low. Horizontal levels are price coordinates, relative to which a price may stop or reverse its trajectory. In the market, these levels are called support and resistance. Circles and rectangles are highlighted examples where the price reversed in history. This color highlighting indicates horizontal lines that may put pressure on the asset's price in the future. The up/down arrows are landmarks of the possible price direction in the future.  
China's Deflationary Descent: Implications for Global Markets

China's Deflationary Descent: Implications for Global Markets

Michael Hewson Michael Hewson 10.08.2023 08:36
China slips into deflation   By Michael Hewson (Chief Market Analyst at CMC Markets UK)   A disappointing set of China trade numbers for July saw European and US markets selloff sharply yesterday, reinforcing concerns that the Chinese economy is struggling, undermining hopes that the slowdown in Q2, was simply a one-off. If anything, the signs of a slowdown have been there for months for China, given that PPI inflation has been negative all this year, with headline CPI following it at a distance.  This morning headline CPI inflation in China followed the PPI measure into outright deflation for the first time in 28 months, increasing fears that for all the promises of further stimulus measures, Chinese authorities may be facing limitations in the type of stimulus they can implement when it comes to kick starting domestic demand.     CPI inflation fell from 0.2% in June to -0.3% in July, while PPI came in at -4.4%, the 10th month in a row that prices have been negative. Chinese deflation has been the proverbial elephant in the room when it comes to recent tightening measures from the Federal Reserve, the ECB, and Bank of England. How many more rate hikes can we expect in the coming months when there is a clear deflationary impulse coming from Asia, and where is the tipping point when it comes to the risk of overtightening. With recent rebounds in oil prices prompting a rebound in gasoline/petrol prices, along with the clear lags when it comes to the effects of previous rate hikes, does the risk of overtightening outweigh the risks of signalling a pause, and waiting to see the effects of previous rate hikes on consumers as fixed rates roll off.     Tomorrow's US CPI, and Friday's PPI numbers could go some way to answering this question, however it is becoming clearer that central banks are leaning more towards pausing in September, which means we could well have seen the end of the rate hiking cycle for all three, the Federal Reserve, ECB, and Bank of England. Tighter credit conditions for banks were also behind yesterday's sell-off after Italy unexpectedly slapped its banking sector with a 40% windfall tax on its profits for this year. This raised concerns that other European countries like Germany, France and Spain may follow suit.     UK banks also fell back although the prospect of a UK tax is lower given that the banking sector here already pays a higher rate due to the 3% banking levy, on top of the 25% corporation tax rate, although there have been some misguided calls for the UK government to follow suit in a similar fashion to the energy profits levy on energy companies. That would be unwise given it could prompt banks to cut back on lending, and in turn become more risk averse which in turn could impact profits growth, as well as cutting credit into the real economy.       EUR/USD – having failed to consolidate its move above 1.1000 the euro has slipped back with the lows last week just above 1.0900, a key support. We currently have resistance at the 1.1050 area which we need to break to have any chance of revisiting the July peaks at 1.1150.     GBP/USD – gave up its Monday gains having failed to move above the 1.2800 area, however while above the lows last week at 1.2620 area the bias remains higher. We need to see a move back above the 1.2800 area to ensure this rally has legs. Below 1.2600 targets 1.2400. Resistance at the 1.2830 area as well as 1.3000.         EUR/GBP – continues to struggle near the 0.8650 area but we need to see a move below the 0.8580 area to signal a short-term top might be in and see a return to the 0.8530 area. Also have resistance at the 100-day SMA at 0.8680.     USD/JPY – looks set for a retest of the 144.00 area having rebounded from the 141.50 area. While below the 144.00 area the risk is for a move towards the 140.70 area. Main resistance remains at the previous peaks at 145.00.     FTSE100 is expected to open 32 points higher at 7,559     DAX is expected to open 88 points higher at 15,863     CAC40 is expected to open 63 points higher at 7,322  
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US CPI Expected to Edge Higher in July: Implications for Rate Hike Decisions and Market Sentiment

Michael Hewson Michael Hewson 10.08.2023 09:07
US CPI expected to edge higher in July    By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets saw a decent rebound yesterday after the Italian government clarified the details around its windfall tax bombshell from earlier in the week. The gains were also helped by a belief that deflation in China could lead to the end of further rate hikes from central banks here in Europe as well as the US.     US markets on the other hand, underwent another negative session as nervousness crept in ahead of today's US inflation numbers, with Nasdaq 100 leading the falls, at the same time as US 2-year yields finished the day higher.  The slowdown in China does raise the risk that central banks might over play their hand when it comes to further rate hikes, while any indication that inflation might start to baseline and turn higher could well complicate matters further as the Federal Reserve decides as to whether it has done enough, or whether they need to hike again in September. This makes today's US CPI for July and tomorrow's PPI numbers extremely important in the decision-making process.     In the last 12 months we've seen US CPI fall from a peak of 9.1% in June last year, slowing to 3% in June, with the slowdown in prices being very much a one-way process. If we do see a move higher to 3.3% which is what is expected there is a concern that might prompt some concern that we've bottomed. Core CPI slowed to 4.8%, in June which was more encouraging, and it is here that the Fed may well choose to focus its attention. With the Federal Reserve having hiked rates by another 25bps in July, there is this sense that further rate hikes beyond July could be a big ask, especially with PPI inflation on the cusp of going negative, when the July numbers get releases tomorrow. That said anyone expecting a straight-line process when it comes to slowing inflation could find that further weakness towards 2% might not be such a straightforward process. Expectations for July are for headline CPI to tick higher to 3.3%, while core prices are expected to slow to 4.7%.      Any indication that we might be at a short-term base when it comes to headline inflation could prompt some concern that the Fed might think about another rate hike at its September meeting, with the next key focus likely to be on the annual Jackson Hole Symposium at the end of the month. US weekly jobless claims are expected to remain steady at around 230k.     EUR/USD – finding support just above the 50-day SMA, with resistance at the 1.1050 area which we need to break to have any chance of revisiting the July peaks at 1.1150. Support at the 1.0900 area.     GBP/USD – remains capped just below the 1.2800 area. We need to see a move back above the 1.2800 area to ensure this rally has legs. We have support at the 1.2620 area. Below 1.2600 targets 1.2400. Resistance at the 1.2830 area as well as 1.3000.         EUR/GBP – continues to struggle near the 0.8650 area but we need to see a move below the 0.8580 area to signal a short-term top might be in and see a return to the 0.8530 area. Also have resistance at the 100-day SMA at 0.8680.     USD/JPY – continues to edge back towards last week's high just below the 144.00 area, having rebounded from the 141.50 area. While below the 144.00 area the risk is for a move towards the 140.70 area. Main resistance remains at the previous peaks at 145.00.     FTSE100 is expected to open 9 points lower at 7,578     DAX is expected to open 92 points higher at 15,944     CAC40 is expected to open 45 points higher at 7,367  
US Inflation Forecasted at 3.3%, UK GDP Projections at 0%, Fed Member Harker's Views on Rates

US Inflation Forecasted at 3.3%, UK GDP Projections at 0%, Fed Member Harker's Views on Rates

Ed Moya Ed Moya 10.08.2023 09:32
US inflation expected to rise to 3.3% UK GDP projected to fall to 0% Fed member Harker says rates may have peaked The British pound has had a relatively quiet week. In the North American session, GBP/USD is trading at 1.2731, down 0.13%. Markets eye US inflation, British GDP It has been a quiet week on the data calendar, with no tier-1 events out of the UK or the US. The rest of the week will be busier, with the US inflation report on Thursday and UK GDP on Friday. That could mean some volatility for the sleepy British pound. US inflation expected to rise The Federal Reserve’s aggressive tightening campaign has made its impact felt, as inflation has been falling and dropped to 3.0% in June. Headline CPI is expected to rise to 3.3% in July, while the core rate is expected to remain steady at 4.8%. Will an uptick in inflation change the Fed’s rate path? Probably not, especially if Jerome Powell follows the view that he has often stated, which is that a rate policy is not based on one or two inflation reports. The money markets are confident that the Fed will take a pause at the September 20th meeting, with an 86% probability according to the FedWatch tool. Another pause in November is likely (71% probability), but a higher-than-expected inflation report on Thursday would likely raise the odds of a rate hike in November.   Fed member Harker said on Tuesday that the Fed might be done raising rates, “absent any alarming new data”. Harker said that rates would need to stay at the current high levels “for a while” and went as far as to say that the Fed would likely cut rates at some point in 2024. The UK economy is not in good shape and the possibility of a recession is very real. GDP is expected to flatline in Q2 (0.0%) after a weak gain of 0.1% in the first quarter. A weaker-than-expected GDP reading could spook investors and send the British pound lower.     GBP/USD Technical GBP/USD is testing support at 1.2747. The next support level is 1.2622  1.2874 and 1.2999 are the next resistance lines
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UK Q2 GDP Forecast: Potential Stall Amid Economic Outlook Uncertainty - Analysis by Michael Hewson

Michael Hewson Michael Hewson 11.08.2023 08:07
UK economy expected to stall in Q2. By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets enjoyed their second successive day of gains yesterday, boosted by the announcement by China to end its ban on overseas travel groups to other countries has also helped boost travel, leisure, and the luxury sector. The gains were also helped by a lower-than-expected rise in US CPI of 3.2%, with core prices slipping back to 4.7%, which increased expectations that we could well have seen the last of the Fed rate hiking cycle, which in turn helped to push the S&P500 to its highest levels this week and on course to post its biggest daily gain since July.     Unfortunately, San Francisco Fed President Mary Daly had other ideas, commenting that the central bank has more work to do when it comes to further rate hikes, which pulled US yields off their lows of the day, pulling stock markets back to break even.   This failure to hang onto the gains of the day speaks to how nervous investors are when it comes to the outlook for inflation at a time, even though Daly isn't a voting member on the FOMC this year, and she's hardly likely to say anything else. Certainty hasn't been helped this week by data out of China which shows the economy there is in deflation, despite recent upward pressure on energy prices.     It also means that we can expect to see a lower open for markets in Europe with the main focus today being on the latest UK Q2 GDP numbers, as well as US PPI for July. Having eked out 0.1% growth in Q1 of this year, today's UK Q2 GDP numbers ought to show an improvement on the previous two quarters for the UK economy, yet for some reason most forecasts are for zero growth. That seems unduly pessimistic to me, although the public sector strike action is likely to have been a drag on economic activity.     Contrary to a lot of expectations economic activity has managed to hold up reasonably well, despite soaring inflation which has weighed on demand, and especially on the more discretionary areas of the UK economy. PMIs have held up well throughout the quarter even as they have weakened into the summer. Retail sales have been positive every month during Q2, rising by 0.5%, 0.1% and 0.7% respectively. Consumer spending has also been helped by lower fuel pump prices, and with unemployment levels still at relatively low levels and wage growth currently above 7%, today's Q2 GDP numbers could be as good as it gets for a while.     Despite the resilience shown by the consumer, expectations for today's Q2 are for a 0% growth which seems rather stingy when we saw 0.1% in Q1. This comes across as surprising given that Q2 has felt better from an economic point of view than the start of the year, with lower petrol prices helping to put more money in people's pockets despite higher bills in April. This raises the prospect of an upside surprise, however that might come with subsequent revisions.       Nonetheless, even as we look back at Q2, the outlook for Q3 is likely to become more challenging even with the benefit of a lower energy price cap, helping to offset interest rates now at their highest levels for over 15 years. With more and more fixed rate mortgages set to get refinanced in the coming months the second half of the year for the UK economy could well be a lot more challenging than the first half.     Yesterday US CPI came in slightly softer than expected even as July CPI edged up to 3.2% from 3% in June. Today's PPI numbers might show a similar story due to higher energy prices, but even here we've seen sharp falls in the last 12 months. A year ago, US PPI was at 11.3%, falling to 0.1% in June, with the move lower being very much one way. We could see a modest rebound to 0.7% in July. Core prices have been stickier, but they are still expected to soften further to 2.3% from 2.4%. 12 months ago, core PPI was at 8.2% and peaked in March last year at 9.6%.       EUR/USD – squeezed above the 1.1050 area yesterday, before failing again, and sliding back below the 1.1000 area. Despite the failure to break higher we are still finding support just above the 50-day SMA. Below 1.0900 targets the 1.0830 area.     GBP/USD – popped above the 1.2800 area yesterday and then slipped back. We need to see a sustained move back above the 1.2800 area to ensure this rally has legs. We have support at the 1.2620 area. Below 1.2600 targets 1.2400. Resistance at the 1.2830 area as well as 1.3000.         EUR/GBP – pushed up to the 100-day SMA with resistance now at the 0.8670/80 area. Support comes in at the 0.8580 area with a break below targeting the 0.8530 area. Above the 100-day SMA targets the 0.8720 area.     USD/JPY – closing in on the June highs at the 145.00 area. This is the key barrier for a move back towards 147.50, on a break above the 145.20 level. Support now comes in at the 143.80 area.     FTSE100 is expected to open 42 points lower at 7,576     DAX is expected to open 70 points lower at 15,926     CAC40 is expected to open 30 points lower at 7,403
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US Inflation Accelerates to 3.2%, UK GDP Forecast, and Pound's Reaction to Economic Data

Kenny Fisher Kenny Fisher 11.08.2023 08:23
US inflation accelerates by 3.2% UK GDP expected to rise 0.1% in Q2 The British pound showed some strength earlier but reversed directions and lost ground after the US inflation report. In the North American session, GBP/USD is trading at 1.2725, up 0.05%. US headline CPI rises, core rate ticks lower The US inflation report was somewhat of a mix, but most important was that both headline and core inflation were within expectations. This meant that the reaction of the US dollar was muted following the inflation release. Headline CPI climbed to 3.2% y/y in July, above the June reading of 3.0% but shy of the consensus estimate of 3.0%. This marked the first time in 13 months that headline CPI accelerated, but the upswing isn’t all that significant, as it was due to base effects. Core CPI ticked lower to 4.7% y/y in July, down from 4.8% in June. The Fed will be encouraged by the fact that on a monthly basis, both headline and core CPI posted a very modest gain of 0.2%, matching the estimate and unchanged from June. Inflation has fallen sharply in recent months, but the Fed will find it more difficult to bring core inflation down to the 2% target. The sharp drop in energy prices has sent headline CPI lower, but the core rate excludes food and energy prices. Inflation is being driven by services and wages, which explains why core CPI is so much higher than headline CPI. The inflation report has cemented the Fed holding rates in September, barring a huge surprise. The odds of a pause have risen to 90%, up from 86% prior to the inflation report, according to the CME FedWatch tool. The Fed may well be done with the current rate-tightening cycle, but don’t expect to hear that from anyone at the Fed, which does not want the markets to become too complacent about inflation.   UK GDP expected to rise by 0.1% The UK will post preliminary GDP on Friday. The consensus estimate stands at 0.1% q/q for the second quarter. If GDP misses the estimate and falls into negative territory, investors could get nervous and send the pound lower. Conversely, if GDP beats the estimate, the pound could gain ground. The Bank of England will be watching carefully, as it digests key economic data ahead of the next meeting on September 21st. . GBP/USD Technical GBP/USD is testing resistance at 1.2747. The next resistance line is 1.2874  1.2622 and 1.2495 are providing support  
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China's Unexpected Rate Cuts Reflect Growing Concerns Amidst Data Weakness

Michael Hewson Michael Hewson 16.08.2023 11:57
05:50BST Tuesday 15th August 2023 UK wage growth set to give Bank of England an extra headache  By Michael Hewson (Chief Market Analyst at CMC Markets UK)     European markets underwent a modestly positive start to the week despite concerns over the Chinese real estate sector which weighed on the FTSE100, as equities tried to bounce back after two weeks of declines. US markets initially struggled during the first half of the session before rallying strongly into the close, led by the Nasdaq 100. Asia markets, which started the week badly have been more mixed today after Japanese GDP beat forecasts, due to a boom in auto exports and tourism, and poor Chinese economic numbers, which once again disappointed.   Despite a strong start to the year Chinese retail sales have struggled to match the performance seen in April when retail sales rose 18.4%. Since that solid gain spending patterns have struggled despite the weak comparatives of an economy that was, for the most part, subject to lockdowns and restrictions.     The May numbers saw a gain of 12.7% when the same rules applied, while June saw another slowdown to 3.1%, as the Chinese economy showed lacklustre growth of 0.8% in Q2, a sharp slowdown from the 2.2% seen in Q1. With the start of Q3 the picture hasn't got any better with July retail sales falling short of expectations, rising 2.5%, instead of the 4% rise expected. Industrial production also came up short, rising 3.7% instead of the 4.3% expected. The statistics bureau also didn't include the figures for youth unemployment, which has risen sharply in recent months, with the 16-24 cohort reaching 21.3% in the June numbers. In a sign that the numbers were going to be poor, or simply because of concerns over the property sector just before the numbers were released, Chinese authorities reduced one-year loan rates by 15bps and reduced the seven-day reverse repo rate by 10bps.       It's set to be an important week for the UK economy, and more importantly for the Bank of England in the context of how many more rate hikes they feel will be necessary in the face of sticky core inflation and record wages growth. Today's wages and unemployment numbers for the 3-months to June are set give the central bank an additional headache as it looks to try and play catch-up after being slow to react to the initial inflation surge. We've already seen the UK unemployment rate rise from 3.7% to 4% in the 3-months to May, since the start of the year as more people return to the workforce as the cost-of-living squeeze pushes people out of retirement. While the unemployment rate has risen from the lows of 3.5% back in August, wage growth has also risen quite sharply over the same period, hitting a record high of 7.3% at the most recent set of numbers, and looks set to rise to a new record of 7.4% today.     Various Bank of England policymakers have expressed concern that higher wages are making it more difficult to rein in core inflation, and that workers should refrain from asking for large pay rises. This tone-deaf response somewhat ignores the Bank of England's role in fuelling this trend in that the reason people are asking for these pay rises is because of the central bank's failure to nip inflation in the bud, when it became apparent to almost everyone except them, that the rise in prices was anything but transitory.     There is a sense now, however, that inflation has peaked, and although still elevated, that upward pressure on wages should start to slow, although it's not likely to happen quickly, with inflation still over 3 times the central bank's target, although it should slow quite sharply when the July figures are released tomorrow.     It's also a big week for the US consumer with the release of US retail sales for July later today, and then the latest earnings numbers from Target and Walmart later this week. After a steady Q2, the US consumer has shown little sign of slowing down when it comes to spending and today's July numbers aren't expected to be any different with a rise of 0.4% expected.     EUR/USD – slid below the 50-day SMA yesterday falling to the 1.0875 area. The main support remains at the 1.0830 area and July lows. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – slipped back to the 1.2615 area yesterday but continues to find support above the 1.2600 area. A break below 1.2600 targets 1.2400. Until then the bias is for a move back above the 1.2800 area through 1.2830 to target 1.3000.        EUR/GBP – came under further pressure yesterday with the 100-day SMA acting as resistance at the 0.8670/80 area. Support comes in at the 0.8580 area with a break below targeting the 0.8530 area. Above the 100-day SMA targets the 0.8720 area.     USD/JPY – has broken above the previous peaks this year at 145.10, opening up the prospect of further gains towards 147.50. Support remains back at the 143.80 area; however, we could also find support at the 144.80 area.     FTSE100 is expected to open 14 points higher at 7,521     DAX is expected to open 44 points higher at 15,948     CAC40 is expected to open 23 points higher at 7,371  
ECB Meeting Uncertainty: Rate Hike or Pause, Market Positions Reflect Tension

Challenges Ahead: Examining the Bank of England's Inflation Fight and Economic Deterioration in the UK

InstaForex Analysis InstaForex Analysis 16.08.2023 13:30
The Bank of England has raised interest rates fourteen times in a row, but has failed to make significant progress in the fight against high inflation. Moreover, recent reports, some of which were released on Tuesday, show a deterioration in various economic processes in the UK. Let's discuss this in more detail.     Inflation in the UK initially rose more sharply than in the US or EU. The market probably believed that if inflation in the UK was higher, the BoE would raise interest rates longer and stronger. To some extent, this is true since its rate has risen more compared to the European Central Bank. But at the same time, the Federal Reserve's rate is even higher and has every chance of remaining so until both central banks begin easing policies. As we can see, the pound sterling has no advantage in this regard. Unemployment in the UK has increased over the past year from 3.5% to 4.2%.   In other words, it is indeed growing in the UK, unlike in the US, where the indicator remains near its 50-year lows. Wage growth rates have increased from 5.8% to 8.2% in the last five months alone. And the faster wages grow, the higher the chances of a new acceleration in inflation. The last five quarters of the UK's GDP ended with the following results: +0.1%, -0.1%, +0.1%, +0.1%, +0.2%. Let's compare them with the last five quarters in the US: -0.6%, +3.2%, +2.6%, +2.0%, +2.4%. The difference is obvious. If the BoE's rate were now at 3% or 4%, meaning there was room for further rate hikes, the pound sterling could continue to rise based on everything mentioned above. However, the UK interest rate has risen to 5.25%, which is the highest level since 2008.   Its peak was at 5.75% in 2008. Assuming that the rate will not exceed this value, the BoE will raise the rate two more times at most. Theoretically, the central bank could increase it to 6.5-7%, which is clearly required by the current inflation rate, but for now I don't believe this will happen, and the market is unlikely to put such a scenario into prices. Therefore, monetary tightening in the UK is coming to an end, as it is in the US. America has almost achieved its target, and its economy has hardly suffered. The UK cannot boast of the same. I believe that demand for the pound will only decrease.     Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still consider targets around 1.0500-1.0600 quite realistic, and with these targets in mind, I recommend selling the instrument. The a-b-c structure looks complete and convincing. Therefore, I continue to advise selling the instrument with targets located around the 1.0836 mark and even lower. I believe that we will continue to see a bearish trend. The wave pattern of the GBP/USD pair suggests a decline.   You could have opened short positions a few weeks ago, as I advised, and now traders can close them. The pair has reached the 1.2620 mark. There's a possibility that the current downward wave could end if it is wave d. In this case, wave 5 could start from the current levels. However, in my opinion, we are currently witnessing the construction of a corrective wave within a new bearish trend segment. If that's the case, the instrument will not rise further above the 1.2840 mark, and then the construction of a new downward wave will begin.
ECB Meeting Uncertainty: Rate Hike or Pause, Market Positions Reflect Tension

Analyzing Tuesday's GBP/USD Trades: Volatility, Reports, and Trading Signals

InstaForex Analysis InstaForex Analysis 16.08.2023 13:40
Analyzing Tuesday's trades: GBP/USD on 30M chart   On Tuesday, GBP/USD went through low volatility and messy movements. In general, the pound's movements were the same as those of the EUR/USD pair. The market reaction to the reports was also similar, except that the European ZEW indexes were not related to the British pound. However, it had its own data in the form of reports on unemployment, wages, and unemployment benefit claims. In our opinion, the pound should have fallen not risen in response to the British reports in the first half of the day, as two of the three reports turned out to be worse than forecasts. Unemployment increased, and the number of benefit claims was higher than expected. However, the wage report, which showed a sharp growth rate, tipped the balance. As a result, the pair continued to correct after rebounding from the 1.2620 level, but before that, it was in a sideways channel for two weeks and simply returned to it. We don't expect the pound to start an uptrend. GBP/USD on 5M chart   Several trading signals were formed on the 5-minute chart. The pair spent the entire day between the levels of 1.2688 and 1.2748, regularly rebounding from them. Volatility was 78 points. There is no point in analyzing each individual signal, as they were almost identical. Beginners had to decide for themselves whether they wanted to scalp between levels, the distance between which is 30-35 points. As we can see, the price regularly bounced from these levels, which means that none of them was unnecessary. We witnessed such a movement on Tuesday. Since most of the signals turned out to be right, it was possible to earn a decent amount, but we do not see much sense in opening 10 trades with a potential profit of 10 points each.   Trading tips on Wednesday: On the 30-minute chart, the GBP/USD pair may be in a flat position. However, we insist that the pound fall, as we still believe it is overbought and unreasonably expensive. Not all of this week's reports may support the dollar, so we may see messy movements in the sideways channel. The key levels on the 5M chart are 1.2499, 1.2538, 1.2605-1.2620, 1.2653, 1.2688, 1.2715, 1.2748, 1.2787-1.2791, 1.2848-1.2860, 1.2913. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Wednesday, the UK is set to release an inflation report, and this is the main item for the day. If it turns out that inflation is rising or falling more slowly than expected, the pound may jump.   Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.  
EUR/USD Outlook: Dovish Shift and Inflation Data Impact Forex Markets

GBP/USD Analysis: Limited Range and Bearish Momentum

InstaForex Analysis InstaForex Analysis 16.08.2023 13:53
GBP/USD The British pound has stayed within the 1.2666-1.2720 range, but this time the exit occurred in the upper shadow. The 23.6% correction level acted as a limiting factor. The price will probably try to mark the August 3rd and 14th lows, and under favorable circumstances, consolidate below 1.2666 to reach 1.2590.   The Marlin oscillator continues to consolidate in a narrow range on bearish territory. It is possible for the price to reverse to the upside, although the chances of it are decreasing every day. In order to build a deep correction, the price needs to settle above 1.2720, then overcome the MACD line around 1.2780.     On the four-hour chart, the price failed to settle above the balance line, returning to 1.2666. The MACD line enhances this level. The Marlin oscillator helped the bears just in time - it is already in the negative territory.
Will Entertainment Trends Spark a Retail Revival? Examining the Impact of Taylor Swift, Barbie, and More on UK Retail Sales

Will Entertainment Trends Spark a Retail Revival? Examining the Impact of Taylor Swift, Barbie, and More on UK Retail Sales

Michael Hewson Michael Hewson 18.08.2023 07:58
Will Taylor Swift and Barbie help to lift UK retail sales? By Michael Hewson (Chief Market Analyst at CMC Markets UK)   This week hasn't been a good week for the FTSE100, with 4 days of declines on top of a poor finish to the end of last week, with the index down 4% over the last 5 days, and down at 5-week lows. The performance of the DAX has been slightly better, but it is still down by 2% over the same period as concerns about the health of the Chinese economy, along with a sell-off on global bonds causes investors to question how long rates are likely to stay at these sorts of levels.   For so long the debate has been about how high interest rates would be likely to go, and has been framed around the duration period before rates start to get cut again. In the last few days, the frames of reference have started to shift from how high rates are likely to go, towards how long they are likely to stay at current levels if inflation continues to be on the sticky side. US markets continued to slip lower after Europe had closed, as the momentum from the recent technical breaks on the S&P500 and Nasdaq 100 gained momentum, both closing at 5-week lows, as US 10-year yields posted their highest daily close since 2008, with UK gilt yields already back at 2008 levels. Yesterday's weak US close looks set to translate into another weak open for markets here in Europe, putting the FTSE100 on course to post its worst run of daily losses since October last year. While we've heard plenty of alarmist headlines over the effects of global warming in the past few months, at least the weather gave UK consumers a reason to go out and spend in June, beating expectations of a gain of 0.2% by some amount, with a rise of 0.7%.     Not only did sales in supermarkets and food outlets see a decent rebound, but we also saw a strong showing from department stores and furniture outlets. Retail sales have proved to be remarkably resilient in the past few months with gains over the course of April, May, and June. The resilience in wages growth over the past few months may also have played a part in this resilience, however heading into Q3 the big question is whether this can be sustained. Recent spending data from Barclaycard showed entertainment spending rose 15.8% in July on the back of an uptick in spending for live events including Taylor Swift, as well as bookings for holidays after a warm June. We also saw the release of 4 big movie releases during July, including Indiana Jones and the Dial of Destiny, Mission Impossible Dead Reckoning, Barbie, and Oppenheimer. On the flip side, spending on clothing saw a decline due to the wet weather. If we see another positive month for July retail sales, could we call it a Barbie bounce? For the most part expectations aren't especially positive with an expectation that we could see a decline in July retail sales including fuel of -0.6%, which would be the first negative month since March when sales fell by -1.2%. The final reading of EU CPI for July is expected to be confirmed at 5.3%, with core prices at 5.5%.       EUR/USD – currently languishing close to the bottom of its recent range but just above the main support area at the 1.0830 area. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – continues to edge higher back towards the 1.2800 area. Remains well supported above the recent lows at the 1.2600 area. A break below 1.2600 targets 1.2400. A move above the 1.2800 area through 1.2830 could see a move to target 1.3000.           EUR/GBP – slipped back to the 0.8520/30 area, which is holding for now. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – continues to edge higher, towards the 147.50 area. The previous peaks this year at 145.10 should act as support.  A move below the 144.80 area, targets a move back to the 143.10 area.     FTSE100 is expected to open 25 points lower at 7,285     DAX is expected to open 50 points lower at 15,626     CAC40 is expected to open 16 points lower at 7,176  
Detailed Analysis of GBP/USD 5-Minute Chart

Market Update: UK Bond Yields Surge, Pound's Rebound, and Retail Sales Outlook

Ed Moya Ed Moya 18.08.2023 10:07
UK 10-year government bond yield surges to a 15-year high US 10-year real yields approach 14-year high Dollar also lower on rebounding yen and yuan The British pound is still rallying from the latest inflation that suggests sticky core inflation will keep the BOE in tightening mode.  With the global bond market selloff being the dominant theme on Wall Street, traders are noticing Gilt yields are standing out.  With FX traders pricing in three more rate hikes by the BOE, it seems that could be the trigger to allow the pound to continue its rebound. Today’s the UK benchmark 10-year bond yield rose 7.7 bps to 4.716%, the highest levels since August 2008.  If we see a further vicious cycle here with Gilt yields, this will suggest BOE rate hike wagers are not cooling.       The GBP/USD daily chart is displaying a Dragonfly doji pattern has identified a bullish reversal that is currently respecting the 50-day SMA.  Price action is also tentatively breaking above the downward sloping trendline that has been in place since mid-July.  If bullishness remains intact, further upside could target the  1.2825 level, followed by the 1.2920 region.  The psychological 1.30 level could remain an elusive target as expectations remain for the US economy to outperform most advanced economies.       Looking Ahead: The UK July retail sales report will show spending declined, impacted by the unseasonable wet weather.  If the mortgage crisis is hitting the economy more harder than expected, we will see that reflected in this report.  Any better-than-expected spending figures could send the pound surging higher.  An-line or worse-than-expected report might trigger some profit-taking from the pound bulls    
Market Highlights: US CPI, ECB Meeting, and Oil Prices

UK Retail Sales Expected to Slip as Concerns about Inflation Persist

Kenny Fisher Kenny Fisher 18.08.2023 10:09
UK retail sales expected to slip in July Fed minutes note concern about inflation The British pound has extended its gains on Thursday. In the North American session, GBP/USD is trading at 1.2772, up 0.32%. UK retail sales expected to decline The UK will wrap up a busy week with retail sales on Friday. The July report is expected to show a decline in consumer spending. Headline retail sales are expected to fall by 0.5% after a 0.7% gain in May and core retail sales are projected to decline by 0.7% after a 0.8% increase in May. The June numbers were higher than expected despite high inflation, helped by record-hot weather. Will the July data also surprise to the upside? The UK consumer has been grappling with the highest inflation in the G7 club, which means shoppers are getting less for their money. This has dampened consumption, a key driver of the economy. Energy prices are lower, thanks to the energy price cap, but food inflation continues to soar and was 17.4% y/y in June. Consumer confidence has been mired deep in negative territory and the GfK consumer confidence index, which will be released later today, is expected at -29, almost unchanged from the previous release of -30 points. The Bank of England would like to follow some of the other major central banks that are in a pause phase, but the grim inflation picture may force the BoE to keep raising interest rates, which could tip the weak economy into a recession. Wage growth jumped to 7.8% in the three months to June, up from 7.5% in the previous period. In July, headline CPI fell to 6.9%, down sharply from 7.9%, but core CPI remains sticky, and was unchanged at 6.9%. The data points to a wage-price spiral which could impede the BoE’s efforts to curb inflation.   The Federal Reserve remains concerned about high inflation and said that additional rate hikes might be needed, according to the minutes of the July meeting. At the meeting, the Fed raised rates by 0.25%, a move that was widely anticipated. Most members “continued to see significant upside risks to inflation, which could require further tightening of monetary policy”. At the same, time, members expressed uncertainty over the future rate path since there were signs that inflationary pressures could be easing.   GBP/USD Technical GBP/USD is testing resistance at 1.2787. The next resistance line is 1.2879  1.2726 and 1.2634 are providing support    
Detailed Analysis of GBP/USD 5-Minute Chart

Detailed Analysis of GBP/USD 5-Minute Chart

InstaForex Analysis InstaForex Analysis 18.08.2023 11:48
Analysis of GBP/USD 5M   GBP/USD traded higher on Thursday, in contrast to the EUR/USD, which saw growth. Volatility increased slightly, but this doesn't change the fact that the pair is still trading within a sideways channel. The pair could move in any direction within such a channel, so it could be quite chaotic. Since the lower band of this channel was the last target, it makes sense that the pair is now moving towards the upper band. The pair does not need any macroeconomic or fundamental background for this movement. And there wasn't any yesterday, as there was nothing to note except for the neutral report on US unemployment claims. As a result, we are currently observing purely technical movements within the flat. On the other hand, yesterday's technical signals were practically ideal, especially in the first half of the day. The Kijun-sen line needed to be adjusted as it moved to the 1.2700 level during the day. The pair bounced off this level during the European trading session. Subsequently, it started a fairly strong upward move, overcame the Senkou Span B line, and reached the 1.2786 mark, where traders should have taken profit. It was about 60 pips. The rebound from 1.2786 should also have been executed using a short position. The price started to fall, overcame the Senkou Span B line once again, and there were no buy signals. Therefore, short positions should have been closed manually closer to the evening. The profit for them was about 35 pips.   COT report:   According to the latest report, the non-commercial group of traders closed 8,900 long positions and 6,300 short ones. Thus, the net position of non-commercial traders fell by almost 2,600 positions in a week. The net position has been steadily growing over the past 11 months as well as the pound sterling. Now, the net position has advanced markedly. This is why the pair will hardly maintain its bullish momentum. I believe that a long and protracted downward movement should begin. COT reports signal a slight growth of the British currency but it will not be able to rise in the long term. There are no drivers for opening new long positions. Slowly, sell signals are emerging on the 4-hour and 24-hour charts. The British currency has already grown by a total of 2,800 pips, from its absolute lows reached last year, which is a significant increase. Without a downward correction, the continuation of the uptrend will be illogical. However, there has been no logic in the pair's movements for quite some time. The market perceives the fundamental background one-sidedly, ignoring any data in favor of the dollar. The Non-commercial group of traders has a total of 83,200 long positions and 36,200 short ones. I remain skeptical about the long-term growth of the pound sterling, and the market has recently begun to pay attention to short positions.   Analysis of GBP/USD 1H On the 1H chart, the pound/dollar pair continues to trade within a sideways channel. The channel has slightly expanded, so the flat hasn't ended. The lines of the Ichimoku indicator are currently weak, but they worked very well in the market yesterday. However, false and inaccurate signals may form around them. Today, the pair could rise to the level of 1.2807 or something lower. On August 18, traders should pay attention to the following key levels: 1.2520, 1.2605-1.2620, 1.2693, 1.2786, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2807) and Kijun-sen (1.2700) lines can also be sources of signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. On Friday, the UK will release a report on retail sales. Nothing lined up for the UK. Therefore, macroeconomics will not have a significant impact on the pair's movement today either, and the price will likely trade within the sideways channel.   Description of the chart: Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals; The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals; Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals; Yellow lines are trend lines, trend channels, and any other technical patterns; Indicator 1 on the COT charts is the net position size for each category of traders; Indicator 2 on the COT charts is the net position size for the Non-commercial group.    
August CPI Forecast: Modest Inflation Increase Expected Amidst Varied Price Trends

GBP/USD Daily Chart Analysis: Potential Breakout and Correction

InstaForex Analysis InstaForex Analysis 18.08.2023 11:56
GBP/USD The first thing that catches our eye regarding the changes on the daily chart over the last 24 hours is how the Marlin oscillator leaves its signal line from its own upward consolidation. Yesterday, traders attacked the MACD line, and the daily candle settled above 1.2720.   Obviously, the price is preparing another attempt to overcome the MACD line (1.2786), coinciding with yesterday's high. Consolidating above this line can send the pound into a deep correction with targets at Fibonacci levels: 1.2879, 1.2940. Returning the price to the 1.2666-1.2720 range will create another uncertain situation. Consolidating below 1.2666 will open the first bearish target of 1.2590.    
US August CPI: Impact on USD/JPY and Trading Strategies

China's Less-Than-Expected Key Loan Rate Cut Amplifies Market Concerns

Michael Hewson Michael Hewson 21.08.2023 09:56
06:10BST Monday 21st August 2023 China cuts key loan rate by less than expected  By Michael Hewson (Chief Market Analyst at CMC Markets UK)     The last 3 weeks haven't been good ones for markets in Europe, with the FTSE100 bearing the brunt of recent weakness posting its worst daily run of losses since October last year, as well as revisiting its March lows last week. The DAX has fared little better, revisiting the lows in July, as weakness in Asia markets, and China especially, pushed the Hang Seng down 5.89% and into bear market territory, as concerns over China's economy, the solvency of its real estate sector, and any risks of contagion into its financial system.   These concerns were amplified last week after Chinese asset manager Zhonghzi missed a coupon payment, as investors increasingly looked towards possible measures from Chinese authorities to support the economy and their financial system. Thus far we've seen little significant indication of support apart from some modest rate cuts or stimulus at a time when the economy is teetering in deflation, as well as a distinct lack of domestic demand.   This morning China did announce that they were cutting their one-year lending rate by 10bps to 3.45%, however they left their 5-year loan rate unchanged at 4.20%, having cut the medium-term loan rate last week. Unsurprisingly markets were less than impressed by this move, expecting authorities to be much more forceful. This lack of urgency has weighed on Asia markets and is unlikely to spark demand in an economy where loan demand appears to be low anyway. In the UK, the latest Rightmove House price survey saw asking prices cut by 1.9% in August the biggest decline this year as higher mortgage rates weighed on demand for houses. The prospect of another rate hike next month is also likely to be affecting confidence, although the fact we are in August, and in the middle of the school holidays probably also has a part to play.   US markets, which until recently had proved to be much more resilient have also succumbed to the recent weakness in equity markets, also sliding for the third week in succession, with both the S&P500 and Nasdaq 100 breaking below their respective 50-day SMA's in a sign that further losses could be on the way.   The weakness in US markets is altogether being driven by a different concern, namely that of higher interest rates for longer as the US economy, which continues to defy expectations of an economic slowdown, sees Fed policymakers push the prospect of more rate hikes in the coming months, pushing up long term yields to multiyear highs in the process, as the prospect of rate cuts gets pushed even further into the future. With that the main investors focus has become less on how high rates might go, and more on how long they will stay there.     This week is likely to see investor attention on the Jackson Hole Symposium where the topic up for discussion is "Structural Shifts in the Global Economy" This will be closely scrutinised for evidence that we might see a rate pause next month when the Federal Reserve next meets to decide on monetary policy.       When Powell spoke last year, he made it plain that there was more pain ahead for US households and that this wouldn't deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up. His tone this week is unlikely to be anywhere near as hawkish, although he will also be reluctant to declare inflation victory either. It is clear that the Fed believes the fight against inflation is far from over, and in that context it's unlikely he will deliver any dovish surprises       EUR/USD – still looking soft with the main support area at the 1.0830 area. Still feels range bound with resistance at the 1.1030 area. Below 1.0830 targets the 200-day SMA.     GBP/USD – while above the twin support areas at 1.2610/20 bias remains for a move through the 1.2800 area, and on towards 1.3000. A break below 1.2600 targets 1.2400.        EUR/GBP – finding support for now at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – continues to edge higher, towards the 147.50 area. Below the 144.80 area, targets a move back to the 143.10 area.       FTSE100 is expected to open 10 points higher at 7,272     DAX is expected to open 15 points higher at 15,589     CAC40 is expected to open 10 points higher at 7,174  
US Inflation Report Sets the Tone for Upcoming FOMC Meeting

GBP Outlook: Short-Term Gains Maintained

ING Economics ING Economics 21.08.2023 10:05
GBP: Holding onto gains, short term The Bank of England's trade-weighted sterling index continues to trade near the highs of the year, no doubt propped up by high short-term interest rates. 3m GBP implied yields of 5.40% make it very expensive to FX hedge positions on UK bond markets, for example. It may well be that this sterling strength endures to the next set of releases on UK wages and CPI (September 12th and 20th respectively), with more mileage to be had against the euro than the dollar given headwinds to the external investment environment. For this week, the UK calendar is light until Wednesday's release of PMI data. EUR/GBP can stay offered in a 0.8500-0.8550 range, while GBP/USD remains trapped well inside last week's narrow range of 1.2615-1.2785.
Market Sentiment and Fed Policy Uncertainty: Impact on August Performance

UK Retail Sales Decline Amid Weather and Economic Factors

Kenny Fisher Kenny Fisher 21.08.2023 12:58
UK retail sales post a sharp decline Rainy weather and high prices weighed on consumer spending The British pound has given up ground on Friday after several days of modest gains. In the European session, GBP/USD is trading at 1.2736, down 0.07%.   UK retail sales decline more than expected The weather in the UK continues to have a major impact on consumer spending. The June retail sales report was stronger than expected, with record-hot weather contributing to an increase in spending. July brought cold and rainy weather, which led to a decline in spending as shoppers preferred to stay home. Retail sales declined -1.2% m/m in July, down from +0.6% in June and below the consensus estimate of -0.5%. The UK consumer’s spending appetite isn’t only dependent on the weather, of course. Consumer spending has been surprisingly resilient in a tough economic environment, but high inflation and rising interest rates are taking their toll. The cost-of-living crisis has created a situation in which sales volumes are falling but the value of goods purchased has been rising – in other words, consumer purchasing power has been falling as consumers are spending more to buy less. What is bad for consumers may be welcome news for the Bank of  England, whose battle with inflation hasn’t gone all that well. The BoE has raised interest rates to 5.25% in order to curb inflation, but a tight labour market and strong consumer spending have contributed to high inflation, which is currently running at a 6.8% clip. If the cracks we saw this week in the labour market and consumer spending continue, it could mean that the BoE has finally turned the corner in its tenacious battle to bring inflation closer to the 2% target.   GBP/USD TechnicalNew button GBP/USD is testing support at 1.2787. Below, there is support at 1.2634  1.2879 and 1.2940 are the next resistance lines  
GBP Outlook: Moderate Strength Amid Light Calendar

GBP/USD Correction and Rhetoric Outlook: ECB vs. Fed

InstaForex Analysis InstaForex Analysis 21.08.2023 13:39
  The GBP/USD currency pair exhibited no noteworthy movements on Friday. The price continues to correct both in the global and local senses. After a double rebound from the level of 1.2634, the pair is aiming for the upper boundary of the sideways channel, i.e., the level of 1.2787. This level has already been reached, so a new round of downward movement within the same channel may begin soon. Since we are currently in a range, trading the pair is inconvenient and inadvisable. While we mentioned that it's better to trade the euro on higher timeframes, in the case of the pound, trading on higher timeframes is not profitable since the pair is not showing any trend movement. Overall, the situation could be more pleasant. A consolidation above the level of 1.2787 could trigger a continuation of the upward correction, which will not break the established concept. Let us remind you that the concept involves a prolonged decline in the British currency. Corrections are integral to any trend, so a slight upward move would not hurt. However, there is still a risk of resuming an illogical and unjustified upward trend that was difficult to explain several months ago. On the 24-hour timeframe, we still do not see a breakthrough of the Ichimoku cloud, so even after the last month's decline, the upward trend has not changed to a downward one. There was virtually no macroeconomic data on Friday, and there will be none today. Volatility for the pound did not exceed 100 points last week, and any value below this level is considered "average." The pound is certainly moving more actively than the euro (which is historically the case), but the range spoils everything.   ECB rhetoric is more important than the Fed This week, there will be even fewer significant events than last week. What can we highlight? Business activity indices? The Jackson Hole symposium, which only starts on Friday? A few speeches by Fed representatives? The U.S. durable goods orders report? All of these are interesting, but what matters is the market's reaction to them. All business activity indices and the durable goods orders report could only provoke a reaction if the actual values differ significantly from the forecasts. Fed representatives' speeches – we observe quite a few of these almost every week. The Fed's policy is currently clear and understood, and it is unlikely that Bowman or Gulsbee will report anything extremely important.   The market does not believe in a rate hike in September or the end of the tightening cycle. A few months ago, Jerome Powell indicated that the regulator was shifting to a "one hike every two meetings" approach, so there should be a pause in September. However, the latest inflation report, showing an acceleration in inflation, suggests we may see at least one more rate hike. And if the August report also shows an acceleration, tightening may occur as early as September. More questions are now being posed to the ECB, for which a brief pause is also expected. If signals start coming from the ECB about even slower tightening, it may be a reason for the European currency to accelerate its decline against the dollar.     The average volatility of the GBP/USD pair over the last five trading days is 84 points. For the pound/dollar pair, this value is considered "average." Therefore, on Monday, August 21, we expect movement within the range limited by levels 1.2646 and 1.2816. A downward reversal of the Heiken Ashi indicator will signal a downward spiral within the lateral channel.   The nearest support levels: S1 – 1.2726 S2 – 1.2695 S3 – 1.2665   The nearest resistance levels: R1 – 1.2756 R2 – 1.2787 R3 – 1.2817   Trading Recommendations: The GBP/USD pair in the 4-hour timeframe has secured itself above the moving average, but we are still in a flat market overall. You can trade now based on rebounds from the upper (1.2787) or lower (1.2634) boundaries of the sideways channel, but reversals may occur without reaching them. The moving average may be crossed very often, but it does not signify a change in trend.   Explanations of illustrations: Linear regression channels - help determine the current trend. If both are directed in one direction, the trend is strong. Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction to trade now. Murrey levels - target levels for movements and corrections. Volatility levels (red lines) - the probable price channel in which the pair will spend the next day, based on current volatility indicators. CCI indicator - its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.  
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

Technical Analysis of EUR/USD and GBP/USD

InstaForex Analysis InstaForex Analysis 21.08.2023 14:22
EUR/USD   Higher Timeframes Bearish players slowly and cautiously broke through the daily cloud last week, reinforced by the weekly medium-term trend (1.0898), and closed the week below the encountered supports. Consolidation in the bearish zone relative to the cloud and continued decline opens new perspectives and opportunities. The nearest supports now are 1.0835–05 (monthly short-term trend + final level of the weekly cross). Further attention will be directed to the support of the monthly medium-term trend (1.0725) and the achievement of the daily target for breaking the Ichimoku cloud. A change of mood and a return to the market of bullish players will bring back the relevance of the attraction and influence of the weekly medium-term trend (1.0898), and above, the market will face resistance from the lower border of the daily cloud and the daily short-term trend (1.0954). There is a fairly wide resistance zone from levels of different timeframes above (1.0986 – 1.1001 – 1.1055 – 1.1112).     H4 – H1 As of writing, the main advantage on the lower timeframes belongs to the bearish players. However, the pair is in the correction zone, using the central pivot point (1.0871) as the current support. The next resistance is the weekly long-term trend (1.0896). This level is key and is responsible for the current balance of power. Consolidation above and a reversal of the moving average can transfer the main advantage to the bullish side. The next targets for the intraday rise will be the resistance levels of the classic pivot points (1.0920 – 1.0945). If the correction stops and the pair updates the low of the correction (1.0846), the downward trend will be restored. Targets for the continuation of the decline will be the supports of the classic pivot points (1.0822 – 1.0798). GBP/USD   Higher Timeframes Last week, the pair once again tested the weekly support (1.2629) for strength and again marked the slowdown and rebound. The daily cloud continued to support the bullish players. As a result, the pair consolidated above the daily short-term trend (1.2715) in the daily cloud. The unpassed and left-behind levels (1.2629 – 1.2597) still retain their value and continue to serve as the nearest important supports for this area. Just as the resistance zone 1.2816 – 1.2865 – 1.2893 – 1.2940 (levels of the daily Ichimoku cross + weekly short-term trend + lower border of the monthly cloud) has not changed its position and significance. H4 – H1 On the lower timeframes, there is uncertainty. The key levels today have joined forces around 1.2721–28 (central pivot point + weekly long-term trend). A prolonged stay above the key levels has allowed the bullish players to retain some advantage, thus forming a bullish target for breaking the H4 cloud (1.2798 – 1.2818). In the development of directional movement, the classic pivot points will come into play. The bullish players will benefit from resistances (1.2767 – 1.2805 – 1.2844), while the bearish players will need supports (1.2690 – 1.2651 – 1.2613).     ***   The technical analysis of the situation uses: Higher timeframes - Ichimoku Kinko Hyo (9.26.52) + Fibo Kijun levels Lower timeframes - H1 - Pivot Points (classic) + Moving Average 120 (weekly long-term trend      
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

Michael Hewson Michael Hewson 22.08.2023 08:41
06:00BST Tuesday 22nd August 2023 UK public sector borrowing set to slow in July   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     We saw a lacklustre start to the week yesterday, European markets just about managing to eke out a small gain, although the FTSE100 finished the day slightly below the flat line, closing lower for the 7th day in a row.    The retreat from the intraday highs appeared to be driven by a rise in yields with both UK and German yields seeing strong gains towards their highs of last week. The move higher in yields also saw US 10-year and 30-year yields hit their highest levels since 2007, but unlike in Europe the rise in yields didn't act as a brake on US markets, which managed solid gains led by the Nasdaq 100. US chipmaker Nvidia was a notable outperformer looking to revisit its record highs of earlier this month ahead of its Q2 earnings which are due to be released tomorrow. As we look ahead to today's European open the strong finish in the US looks set to translate into a similarly positive start here in a couple of hours' time, however it's difficult to escape the feeling that stock markets are starting to look increasingly vulnerable.     Economic uncertainty in China, stagnation or weak growth in Europe and the UK, the only positives appear to be coming from the US where the economy is looking reasonably resilient, hence the rise in yields there. It's slightly harder to explain why yields in the UK and Europe are rising aside from the fact that rates are likely to stay higher for longer.     On the economic data front the only data of note is the latest July public sector borrowing numbers for the UK, which are expected to see a fall to £3.9bn from £17.1bn in May. With total debt now at levels of 100% of GDP the rise in rates is extraordinarily painful given how much of its existing debt is linked to inflation and the retail price index. Having to pay out over £100bn a year in interest is money that might have been better spent elsewhere. It's just a pity that the government didn't take greater advantage of the low-rate environment we saw less than 2 years ago, as had been suggested from a number of quarters at the time. We also have the latest CBO industrial orders for August which are expected to slip back to -12 from -9 in July.     In the US we have July existing home sales which are expected to decline for the second month in a row, by -0.2%. We also have comments from the following Federal Reserve policymakers. Chicago Fed President Austan Goolsbee who leans towards the dovish side will be speaking at an event on youth unemployment alongside the more hawkish Fed governor Michelle Bowman.     We also have Richmond Fed President Thomas Barkin whose most recent comments suggest he sees the prospect of a soft landing for the US economy, although he is not a voting member this year.     EUR/USD – finding support just above the 1.0830 area. Still feels range bound with resistance at the 1.1030 area. Below 1.0830 targets the 200-day SMA.     GBP/USD – continues to look supported while above the twin support areas at 1.2610/20. We need to see a move through the 1.2800 area, to signal potential towards 1.3000. A break below 1.2600 targets 1.2400.       EUR/GBP – continues to find support for now at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – looks to be retesting the August highs on the way towards the 147.50 area. Below the 144.80 area, targets a move back to the 143.10 area.     FTSE100 is expected to open 6 points higher at 7,264     DAX is expected to open 48 points higher at 15,651     CAC40 is expected to open 30 points higher at 7,228  
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis

InstaForex Analysis InstaForex Analysis 22.08.2023 14:49
The net short position in USD grew by $490 million to -$16.272 billion over the reporting week after a strong correction a week earlier. The decline is largely related to long positions on the euro, and in terms of other major currencies, the notable trend is selling across all significant commodity currencies (Canadian, Australian, New Zealand dollars, and also the Mexican peso). The yen and franc are slightly doing better, i.e., there is demand for safe-haven currencies and a sell-off in commodity currencies. Since long positions in gold have decreased by $4.5 billion, we can expect increasing demand for the US dollar.     PMIs for the eurozone, the UK, and the US will be published on Wednesday, which can significantly influence the rate forecasts of the European Central Bank, the Bank of England, and the Federal Reserve. Last week, we witnessed a clear uptrend in bond yields, suggesting increased demand for risk amid more upbeat economic reports. At the same time, we see a sharp deterioration in China's economy, which, on the contrary, points to slowing demand. This dilemma may be resolved after the release of the PMIs, so we can expect increased volatility.   EUR/USD The final estimate confirmed that the euro area annual inflation rate was 5.3% in July 2023, with core inflation unchanged at 5.5%. Since there are no seasonal factors that could explain the price increase at the moment, it would be best to assume the most obvious explanation - price growth is supported by broad price pressures in the growing services sector. Stubborn inflation supports market expectations that the ECB will raise rates in September, and this increase is already reflected in current prices. The strong labor market is also in favor of a rate hike. After a sharp decrease a week earlier, the net long position in the euro grew by $1.275 billion, putting the bearish trend into question. The settlement price is below the long-term average, giving grounds to expect a continuation of the euro's decline, but the momentum has noticeably weakened.   A week earlier, we assumed that the bearish trend would continue. Indeed, the euro consistently passed two support levels, but did not reach the 1.0830 level. The resistance at 1.0960, which the euro can reach if a correction develops, is still considered in the long term. We assume that the trend remains bearish, and the 1.0830 level will be tested in the short term. GBP/USD Inflation in July fell from 7.9% to 6.8%. This is mostly due to the fall in the marginal price of OFGEM (Office of Gas and Electricity Markets) from 2500 pounds to 2074. Without this decline, inflation would have still fallen, but much less - to 7.3%. Despite the sharp decline, inflation remains at a very high level, and further falls in the marginal price of energy carriers are unlikely. The NIESR Institute suggests that, among the possible scenarios for future inflation behavior, we should choose between "very high", assuming an average annual inflation of around 5% over 12 months, and "high persistence", which is equivalent to an annual level of 7.4%. Needless to say, both scenarios imply inflation higher than in the US, so the likelihood of a higher BoE rate remains, leading to a yield spread in favor of the pound. These considerations do not allow the pound to fall and support it against the dollar, while against most major currencies, the dollar continues to grow. After three weeks of decline, the long position in GBP grew by $302 million to $4.049 billion. Positioning is bullish, the price is still below the long-term average, but, as in the case of the euro, an upward reversal is emerging.       In the previous review, we assumed that the pound would continue to decline, but UK inflation pressure remains stubborn, which changed the rate forecast and supported the pound. A correction may develop, and the nearest resistance level is 1.2813. If the pound goes higher, the long-term forecast will be revised. At the same time, we still consider the bearish trend, and the chances of restoring growth are high, with the nearest target being the support area of 1.2590/2620.  
EUR/USD Fragile Amidst Strong US Data and Bleak Eurozone News

GBP/USD Analysis and Trading Signals: Technical Insights and Forecast

InstaForex Analysis InstaForex Analysis 22.08.2023 14:56
Yesterday, the pair formed several good signals to enter the market. Let's analyze what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2726 as a possible entry point. A decline and false breakout at this mark generated a good buy signal. As a result, the pair rose by 15 pips. During the US session, a false breakout and retracement below 1.2753 gave a sell signal. As a result, the pair fell by 25 pips.     COT report: The Commitments of Traders (COT) report for August 15 recorded an increase in both long and short positions. Traders built up positions after the UK GDP report, which was better than economists' expectations. US inflation cooling also had an impact on the balance of power, supporting the pound, as well as persistent core pressure in the UK. Federal Reserve officials will hold their annual Jackson Hole symposium later this week, which could lead to even more strengthening of the British Pound in the short term. The focus will be on Fed Chair Jerome Powell's speech about US monetary policy. As before, the optimal strategy is to buy the pound on dips, as the difference in the policies of the central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders rose by 7,302 to 90,541, while short positions jumped by 3,334 to 39,553. As a result, the spread between long and short positions narrowed by 607. The weekly closing price dropped to 1.2708 compared to the prior value of 1.2749.     For long positions on GBP/USD: Today, the UK will publish reports on public sector net borrowing and the CBI's industrial trends orders. In the event of weak reports, it would be best to act on a decline and false breakout near the new support level at 1.2751. Just below this level are the bullish moving averages, which will form a good entry point for long positions leading to an upward move targeting the resistance at 1.2783. The pair has not been able to get out of this since August 17. A breakout and a downward retest of this range will form an additional buy signal and will reinforce the pound sterling, allowing it to reach a new high of 1.2812. If the pair goes above this range, it might break towards 1.2847, where I will take profits. If GBP/USD declines and there is no buying activity at 1.2751, especially if the UK publishes weak data, the pair will continue to trade within a sideways channel with the bulls having the upper hand. In this case, only the defense of the 1.2723 area and its false breakout would give a signal for opening long positions. I will open long positions immediately on a rebound from 1.2689, keeping in mind a daily correction of 30-35 pips.   For short positions on GBP/USD: Bearish traders did their best yesterday, but buyers are clearly interested in a lower value of the pound. In the first half of the day, it is important to keep the pair below 1.2783. A breakout of this level will produce a sell signal with a prospect of falling to the support at 1.2751, formed yesterday and where a real battle will unfold. A breakout of this level and its upward retest will create an entry point for short positions with a target of 1.2723. The ultimate target is the low at 1.2689 where I will be locking in profits. If GBP/USD trends upward during the European session and if no selling activity is observed at 1.2783, amid strong UK reports, the bulls will maintain control of the market, and will start an upward correction. In such a scenario, a false breakout near the next resistance at 1.2812 would provide an entry point for going short. If there is no downward movement there, I would sell the pound right on a rebound from 1.2847, keeping in mind an intraday correction of 30-35 pips.     Indicator signals: Moving Averages Trading is taking place above the 30-day and 50-day moving averages, which suggests that GBP/USD will recover. Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.     Bollinger Bands If GBP/USD grows, the indicator's upper border near 1.2780 will serve as resistance. If GBP/USD falls, the indicator's lower border near 1.2735 will serve as support.   Description of indicators: • A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart; • A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart; • MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period; • Bollinger Bands: 20-day period; • Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements; • Long non-commercial positions represent the total number of long positions opened by non-commercial traders; • Short non-commercial positions represent the total number of short positions opened by non-commercial traders; • The non-commercial net position is the difference between short and long positions of non-commercial traders.  
Financial World in a Turbulent Dance: Lego, Gold, and Market Mysteries

Flash PMIs Expected to Weaken Further in August: Market Insights by Michael Hewson

Michael Hewson Michael Hewson 23.08.2023 10:04
05:40BST Wednesday 23rd August 2023 Flash PMIs set to weaken further in August   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     The FTSE100 managed to finally break its worst run of losses since 2019 yesterday, posting its first daily gain since the 10th August. The gains were hard-won however with the index trying retreating from its daily highs and failing for the second day in a row to consolidate a move above 7,300. The rest of Europe managed to do slightly better, outperforming and closing higher for the 2nd day in a row, although still closing well off the highs of the day.       US markets on the other hand after starting strongly slipped back after European markets had closed, sliding back on comments from Richmond Fed President Thomas Barkin who said the Fed needed to be open to the prospect the US economy might re-accelerate which might mean the central bank might need to hike rates further and keep them higher for longer, pushing the US dollar to its highs for the day in the process. Despite the weaker finish for US markets, the resilience in Asia markets looks set to see European markets open slightly higher later this morning.  The last set of flash PMIs saw German manufacturing slide to its lowest levels since the Covid lockdowns at 38.8 in further signs that the engine of the German economy continues to stutter. Weak demand in its key export markets as well as domestically, along with higher energy prices weighing on economic activity.       The only bright spot was services which came in at 52.3, but even here economic activity was slower, and both sectors are expected to weaken further in August further complication the task of the ECB which is expected to signal a pause in its rate hiking cycle next month. Manufacturing activity is expected to soften further to 38.6, while services is expected to slip to 51.5. Economic activity in France was also disappointing in July, although the underperformance was more evenly distributed with both manufacturing and services both in contraction heading into Q3. Manufacturing slipped to 45.1 in July and services dropped to 47.1. With energy prices rising sharply over the last few weeks, it's hard to imagine a scenario that will see a significant improvement given the weakness seen in China and other overseas markets. Manufacturing is forecast to come in at 45, and services at 47.5.     While economic activity has been slowing in Europe, the UK has also seen similar slowdowns in both manufacturing and services, although the composite PMI is just about hanging on in expansion territory, unlike its peers across the Channel.     Construction has been a notable strong point, however the focus today is on manufacturing which slowed to 45.3 in July, while services slowed from 53.7 in June to 51.5 in July. The recent GDP numbers for June showed a strong performance, however Q3 is likely to be much more challenging, with higher oil and gas prices likely to filter through at the petrol pump. UK manufacturing is expected to slow to 45, and services to 51.     US manufacturing and services look set to be more resilient at 49 and 52 respectively.      EUR/USD – continues to find support just above the 1.0830 area. Below 1.0830 targets the 200-day SMA at 1.0790 and trend line support from the March lows at 1.0750. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – failing at the 50-day SMA again and the 1.2800 area. We need to see a move through the 1.2800 area, to signal potential towards 1.3000. A break below 1.2600 targets 1.2400.           EUR/GBP – sinking towards support at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – failed to push above the 146.50 area yesterday,but while above the 144.80 area bias remains for a move towards 147.50. Below the 144.80 area, targets a move back to the 143.10 area.     FTSE100 is expected to open 10 points higher at 7,280     DAX is expected to open 42 points higher at 15,747     CAC40 is expected to open 14 points higher at 7,255
GBP/USD Technical Analysis: Sideways Trend and Support Levels

GBP/USD Technical Analysis: Sideways Trend and Support Levels

InstaForex Analysis InstaForex Analysis 23.08.2023 13:34
GBP/USD On Tuesday afternoon, the GBP/USD pair reached the MACD indicator line – the 1.2792 target, afterwards it returned to the 1.2720 support. The price has been moving in a sideways trend on this support for five days now. The Marlin oscillator is still strong, and there could be another attempt to overcome the MACD line.     If the price consolidates below 1.2720, the five-day sideways movement will end, revealing the target at 1.2666, followed by 1.2590 (June 29 low). On the four-hour chart, the oscillator's signal line has moved out of its consolidation by moving downwards, establishing itself in the downtrend territory.     The price consolidating below 1.2720 will confirm its intention to fall, with the 1.2666 level as the target. The MACD line acts as an intermediate support around the 1.2687 mark. It coincides with a series of local extremes from early August, so if the pound plans to show a false downward movement, it might stop at the MACD line.    
Positive Start Expected as Nvidia's Strong Performance Boosts Market Confidence

Positive Start Expected as Nvidia's Strong Performance Boosts Market Confidence

Michael Hewson Michael Hewson 24.08.2023 10:53
05:40BST Thursday 24th August 2023 Positive start expected after Nvidia knocks it out of the park   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Despite a raft of disappointing economic data from France, Germany and the UK which saw services activity slide into recession territory, European equity markets managed to finish the day higher yesterday. Rather perversely markets took these data misses as evidence that rate hikes were starting to work and that further rate hikes were likely to be unnecessary, sending bond yields sharply into reverse, as markets started to price an increased probability of recession. Yesterday's economic data will certainly offer food for thought for central bankers as they get set to assemble today at Jackson Hole for the start of the annual symposium, ahead of interest rate meetings next month where they are likely to decide whether to raise rates further to combat sticky inflation. If yesterday's data is in any way reflective of a direction of travel, then we could see a Q3 contraction of 0.2%. Of course, one needs to be careful in reading too much into one month of weak PMIs, especially in August when a lot of industry tends to shutdown or pare back economic activity, however the weakness in services was a surprise given that the summer holidays tend to see that area of the economy perform well.     US markets also underwent a strong session led by the Nasdaq 100 in anticipation of a strong set of numbers from Nvidia with the bar set high for a strong set of Q2 numbers. Back in Q1 when Nvidia set out its revenue guidance for Q2 there was astonishment at the extent of the upgrade to $11bn. This was a huge increase on its Q2 numbers of previous years, or any other quarter, with the upgrade being driven by expectations of a big increase in sales of data centre chips, along with investments in Artificial Intelligence.       Last night Nvidia crushed these estimates with revenues of $13.5bn, datacentre revenue alone accounting for $10.3bn of that total, a 171% increase from a year ago. For comparison, in Q1 datacentre revenue accounted for $4.3bn. Gross margins also beat expectations, coming in at 71.2% as profits crushed forecasts at $2.70 a share. Nvidia went on to project Q3 revenues of $16bn, plus or minus 2%. The company also approved an extra $25bn in share buybacks, with the shares soaring above this week's record highs in after-hours trading, with the big test being whether we'll see those gains sustained when US markets reopen later today.     On the back of last night's positive finish, as well as the exuberance generated by the belief that interest rate hike pauses are coming next month, European markets look set to open higher later this morning. The focus today is on the latest set of weekly jobless claims numbers which are set to remain unchanged at 239k, as well as July durable goods orders, excluding transportation, which are forecast to see a rise of 0.2%, a modest slowdown from June's 0.5% gain.      EUR/USD – bounced off the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feels range bound with resistance at the 1.1030 area.     GBP/USD – the 1.2600 area continues to hold with resistance still at the 1.2800 area and 50-day SMA. A break below 1.2600 targets 1.2400.        EUR/GBP – briefly hit an 11-month low at 0.8490 before rebounding sinking towards support at the 0.8520/30 area. A move below 0.8500 could see 0.8480. Above the 100-day SMA at 0.8580 targets the 0.8720 area.     USD/JPY – the failure to push above the 146.50 area has seen a pullback below the 145.00 level. This raises the prospect of a move towards the 50-day SMA at 142.70 area.     FTSE100 is expected to open 24 points higher at 7,344     DAX is expected to open 70 points higher at 15,798     CAC40 is expected to open 36 points higher at 7,282  
UK PMIs Signal Economic Deceleration, Pound Edges Lower

UK PMIs Signal Economic Deceleration, Pound Edges Lower

Ed Moya Ed Moya 24.08.2023 12:45
UK manufacturing and services PMIs decelerate The British pound has edged lower on Wednesday. In the North American session, GBP/USD is trading at 1.2720, down 0.09%.     UK PMIs head lower The UK economy continues to cool down, and today’s PMI readings showed deceleration in both the manufacturing and services sectors. The Manufacturing PMI eased to 42.5 in August, down from 45.3 and below the consensus estimate of 42.5. The Services PMI disappointed and fell into contraction territory, with a reading of 48.7. This was lower than the July reading of 51.5 and missed the estimate of 50.8. GBP/USD fell over 100 basis points earlier but has recovered these losses. The weak data might not be such bad news as far as the Bank of England is concerned. The battle to curb inflation has not gone all that well, as the UK has the dubious honour of having the highest inflation among G-7 countries. If weakness in the manufacturing and services sectors dampens hiring and weighs on the tight labour markets, inflationary pressures could ease. The Bank of England meets in September and the markets have fully priced in a rate hike, but it’s unclear what will happen after that, with the markets pricing in one more hike before the end of the year. The BoE’s rate path after September will depend heavily on upcoming inflation and employment reports. It has been a light week on the data calendar and investors will be hoping for some interesting comments at the Jackson Hole Symposium which begins on Thursday. The Fed and other major central banks are expected to wind up their rate-tightening cycles and Jackson Hole has often served as a venue for announcing shifts in policy. Fed Chair Powell has insisted that the fight against inflation is not done, with inflation still above the 2% target. There is talk in the markets of the Fed trimming rates next year, but I would be surprised if Powell mentions rate cuts in his speech on Friday.   GBP/USD Technical GBP/USD pushed below support at 1.2714 and 1.2641 before rebounding higher  There is resistance at 1.2812 and 1.2885    
GBP/USD: Potential Rebound as Price Tests Support

GBP/USD: Potential Rebound as Price Tests Support

InstaForex Analysis InstaForex Analysis 24.08.2023 12:55
GBP/USD Yesterday, the British pound declined strongly by more than a figure. The pair reached the support of lows on the 14th and 3rd of August, at 1.2614. By analogy with those days, the price can continue to rise to the nearest resistance level at 1.2814.     Consolidating above this level will open up the next target at 1.2880 – the 50.0% correction level. The Marlin oscillator continues to move towards the boundary of the uptrend territory. On the four-hour chart, the price reached the level of 1.2720 and the balance line. A consolidation above the MACD line took place.   The price is trying to consolidate above 1.2720, but it seemingly lacks support from the Marlin oscillator, which hasn't left the downtrend territory yet. If the price doesn't drop significantly in the next two candles, Marlin might cross the zero line and pull the price along. The MACD line (1.2690) acts as support.    
Assessing EUR's Approach: Inflation Test and ECB Hawkish Stance - 29.08.2023

GBP/USD Technical Analysis: Within Lateral Channel Amid Volatility and Macro Uncertainty

InstaForex Analysis InstaForex Analysis 24.08.2023 13:15
  The GBP/USD currency pair fell by almost 150 points yesterday following the release of business activity indices in the services and manufacturing sectors of the European Union and the United Kingdom. While only the European indices affected the euro, the pound was influenced by both the European and British indices. This explains the pound's more significant drop, which offset all its losses by the end of the day. Now, if you look closely at the illustration above, you'll see that despite the sharp decline on Wednesday, the pair still sits within the lateral channel of 1.2634–1.2787. Yesterday, it touched the lower boundary of this channel for the third time, predictably rebounding from it, and now it may rise back to the 1.2787 level. Notably, this movement doesn't necessarily require any specific fundamental or macroeconomic background - the pair is in a flat trend, which means the movements are random. Thus, the technical outlook remains unchanged from the previous day despite the high volatility. However, one thing does concern us.   The CCI indicator entered oversold territory yesterday, dropping quite deep. Such signals are typically strong. Although the pair might rise to the mentioned level of 1.2787, it won't remain flat forever, and the chances of a more significant upward movement are slightly higher than yesterday. On the 24-hour time frame, there's no change. The pair still hasn't settled below the Ichimoku cloud, so the upward trend remains intact, and an upward move could resume anytime. As on many previous occasions, the pound may see a minor pullback. Even though we see no reason for the British currency to continue its rise, we must admit that there are still no strong signals indicating a trend change in the long term. The August UK manufacturing business activity index dropped from 45.3 points to 42.5.   The corresponding index for the services sector fell from 51.5 points to 48.7. Consequently, all business activity indices are now below the "waterline" – the 50.0 mark. Hence, we can anticipate further deterioration in other macroeconomic indicators and expect the Bank of England to take a pause. As we've repeatedly stated, the position of the British regulator is unenviable. Inflation remains very high, economic indicators continue to decline, and rates are rising. However, they can't rise indefinitely. The market seems to interpret the macroeconomic backdrop very one-sidedly, seemingly believing in the perpetual tightening of monetary policy in the British Isles. In our opinion, this is a mistake, but as they say, one cannot argue with the market. This week, there are virtually no significant events left. Today, a more or less important report on orders for durable goods in the US will be released, and tomorrow, Jerome Powell will speak. In essence, there's only one question regarding the head of the Federal Reserve, and we won't get an answer.   After inflation in the States accelerated for the first time in 14 months, the rate will be raised in September. However, speaking confidently about it without the August inflation report doesn't make sense.     The average volatility of the GBP/USD pair for the last five trading days is 90 points. For the pound/dollar pair, this value is considered "average." Thus, on Thursday, August 24, we expect movement within the range limited by levels 1.2634 and 1.2814. A reversal of the Heiken Ashi indicator upwards will signal a new upturn in the lateral channel.   Nearest support levels: S1 – 1.2695 S2 – 1.2634 S3 – 1.2604   Nearest resistance levels: R1 – 1.2726 R2 – 1.2756 R3 – 1.2787   Trading recommendations: The GBP/USD pair in the 4-hour timeframe remains above the moving average, but overall the trend is flat. It is possible to trade now on a rebound from the upper (1.2787) or lower (1.2634) boundaries of the lateral channel, but reversals may occur before reaching them. The moving average can be crossed frequently, which doesn't signify a trend change.   Illustrations explanations: Linear regression channels – help determine the current trend. The trend is currently strong if both are pointed in the same direction. Moving average line (settings 20.0, smoothed) – determines the short-term tendency and the direction in which trading should be conducted. Murray levels – target levels for movements and corrections. Volatility levels (red lines) – the likely price channel the pair will spend the next day, based on current volatility indicators. CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.  
GBP/USD Analysis: Intraday Signals, Technical Levels, and COT Report Insights

GBP/USD Analysis: Intraday Signals, Technical Levels, and COT Report Insights

InstaForex Analysis InstaForex Analysis 24.08.2023 13:21
Yesterday, the pair formed several good signals to enter the market. Let's analyze what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.2726 as a possible entry point. A breakout and subsequent retest of this range generated a great sell signal, resulting in a 35-pip drop. A similar scenario with 1.2689, following weak PMI reports, produced a sell signal and the pair fell by 40 pips. During the US session, protecting the monthly low around 1.2627 and weak US reports generated a great buy signal. As a result, the pair rose by 50 pips. Selling from 1.2679 turned out to be a failure, but a breakout and a downward retest of 1.2679 was another buy signal, making it possible to gain 40 more pips.     For long positions on GBP/USD: Today brings some mid-tier data from the Confederation of British Industry, which is unlikely to have a significant impact on market volatility, so I expect the pair to remain under pressure. For this reason, I am not in a hurry to open long positions: only after a false breakout near the new support level at 1.2706, formed at the end of yesterday, will generate buy signal in hopes of updating the nearest resistance at 1.2733, also formed at the end of yesterday's European session. A breakout and consolidation above this range will reinforce the pound sterling, allowing it to reach the 1.2761 high. The ultimate target remains the area of 1.2797 where I will be locking in profits. If GBP/USD declines and there is no buying activity at 1.2706, the pound will be under pressure, but will continue to trade within the sideways channel. In this case, only the defense of the 1.2679 area and its false breakout would give a signal for opening long positions. I will open long positions immediately on a rebound from the monthly low of 1.2646, keeping in mind a daily correction of 30-35 pips.   For short positions on GBP/USD: The sellers lost all their advantage yesterday and now they need to start from scratch. Only an unsuccessful consolidation at 1.2733 after UK data will produce a sell signal with a prospect of falling to the intermediate support level at 1.2706, which was formed yesterday. A breakout of this level and its upward retest would significantly dent the bulls' positions, offering a chance for a more substantial decline towards the low of 1.2679. The ultimate target is the low at 1.2646 where I will be locking in profits. In this case, buyers can try to build the lower band of the new ascending channel. If GBP/USD moves upward during the European session and lacks bearish activity at 1.2733, which is possible given how aggressive the buyers were even after such a large sell-off yesterday, only a false breakout near the next resistance at 1.2761 would provide an entry point for going short. If there is no downward movement there, I would sell the pound right on a rebound from 1.2797, keeping in mind an intraday correction of 30-35 pips.   COT report: The Commitments of Traders (COT) report for August 15 recorded an increase in both long and short positions. Traders built up positions after the UK GDP report, which was better than economists' expectations. US inflation cooling also had an impact on the balance of power, supporting the pound, as well as persistent core pressure in the UK. Federal Reserve officials will hold their annual Jackson Hole symposium later this week, which could lead to even more strengthening of the British Pound in the short term. The focus will be on Fed Chair Jerome Powell's speech about US monetary policy. As before, the optimal strategy is to buy the pound on dips, as the difference in the policies of the central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders rose by 7,302 to 90,541, while short positions jumped by 3,334 to 39,553. As a result, the spread between long and short positions narrowed by 607. The weekly closing price dropped to 1.2708 compared to the prior value of 1.2749.     Indicator signals: Moving Averages Trading is taking place around the 30-day and 50-day moving averages, indicating a sideways market trend. Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart. Bollinger Bands If GBP/USD falls, the indicator's lower border near 1.2646 will serve as support.   Description of indicators: • A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart; • A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart; • MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period; • Bollinger Bands: 20-day period; • Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements; • Long non-commercial positions represent the total number of long positions opened by non-commercial traders; • Short non-commercial positions represent the total number of short positions opened by non-commercial traders; • The non-commercial net position is the difference between short and long positions of non-commercial traders.    
Persistent Stagnation: German Economy Confirms Second Quarter Contraction

Analyzing Powell's Jackson Hole Speech and Lagarde's ECB Insights: Market Insights by Michael Hewson

Michael Hewson Michael Hewson 25.08.2023 09:07
All ears on Powell and Lagarde at Jackson Hole today   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     After an initially positive start to the day yesterday, only the FTSE100 managed to eke out any sort of gains, after a rebound in yields and the fading of the Nvidia sugar rush saw European markets slip into negative territory.   US markets, having started very much in a positive vein with the Nasdaq 100 leading the way higher, also turned tail as bond yields pushed higher, along with the US dollar, finishing the day sharply lower. As we look towards today's European open, the rise in yields and weak finish in the US, as well as weakness in Asia this morning, is set to see European markets open lower this morning. Much of the narrative for this month was supposed to be centred around what Fed chair Jay Powell would likely say at Jackson Hole today with respect to the prospect of another pause in the rate hiking cycle when the FOMC meets next month.   This week's poor economic data out of Germany and France has shifted the spotlight a touch when it comes to central bank policy towards the European Central Bank and Christine Lagarde's speech, at 8pm tonight, after Powell who is due to speak at 3:05pm.   While this year's Symposium is titled "Structural Shifts in the Global Economy" it won't be just Jay Powell whose words will be closely scrutinised for clues about rate pauses next month it will also be the Bank of England and the Bank of Japan where markets will be looking for important insights into the risks facing central banks in terms of the risks in over tightening monetary policy at a time when the challenges facing the global economy are numerous.   This week's PMIs have highlighted the challenges quite clearly to the point that it appears the ECB may well also look at a rate pause next month, alongside the Federal Reserve, although the reasons for an ECB pause are less about inflation falling back to target, than they are about a tanking economy.   The latest German PMIs suggest the prospect of another quarter of contraction in Q3, while the Bank of England has a similar problem, although the bar for a pause next month is slightly higher given how much higher UK CPI is relative to its peers.   Before we hear from ECB President Christine Lagarde, Powell will set the scene just after US markets open, and his tone is likely to be slightly less hawkish than he was a year ago.  When Powell spoke last year, he made it plain that there was more pain ahead for US households and that this wouldn't deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up. While Powell is unlikely to be anywhere near as hawkish, as he was last year, he won't want to declare victory either. As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it's unlikely he will deliver any dovish surprises.   This belief of a slightly hawkish Powell is likely to have been behind yesterday's sharp declines in US markets, which were driven by rising yields as investors continued to price in higher rates for longer. Not even a set of blow-out earnings from Nvidia was enough to keep markets in the black, with the shares opening at a new record high above $500, before sliding back to finish on the lows of the day, closing unchanged. The inability to hold onto any of the early gains suggests that the recent enthusiasm for this $1trn chipmaker may be due a pause. While investors will be focussing on Powell, the focus today returns to the German economy and in the wake of this week's poor PMIs we'll be getting the latest snapshot of the business sentiment in Europe's largest, but also sickest economy, as well as the final reading of Q2 GDP.   The most recent German IFO business climate survey showed sentiment falling to its lowest level since October last year in July at 87.3 and is expected to slow further to 86.8. Expectations also slipped back to 83.5 suggesting the economy could remain in recession in Q3.   Any thoughts that we might see an improvement in August are likely to have been dealt a blow by the sharp rise in oil prices seen in the last few weeks, as well as this week's PMIs. With recent economic data out of China also suggesting a struggling economy, German exporters are likely to continue to find life difficult.        EUR/USD – sinking below the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feelsrange bound with resistance at the 1.1030 area.   GBP/USD – slipped below the 1.2600 area which could well open up a move towards 1.2400 and the 200-day SMA.  We still have resistance at the 1.2800 area and 50-day SMA.       EUR/GBP – the rebound off this week's 11-month low at 0.8490 looks set to retest the 0.8600 area. We also have resistance at the 0.8620/30 area.   USD/JPY – rebounded off the 144.50 area with resistance at the highs this week at the 146.50 area, with resistance also at 147.50.   FTSE100 is expected to open 5 points lower at 7,328   DAX is expected to open 39 points lower at 15,582   CAC40 is expected to open 16 points lower at 7,198    
Unlocking the Potential: Deliverable KRW and its Impact on the Market"

GBP/USD Drops Sharply, Targets Key Support Levels Amidst Jackson Hole Symposium Uncertainty

InstaForex Analysis InstaForex Analysis 25.08.2023 09:49
GBP/USD The British pound plummeted by 125 pips on Thursday, immediately overcoming two strong support levels: 1.2666 and 1.2614. The signal line of the Marlin oscillator is declining in negative territory, with 1.2500 as the target - the embedded line of the price channel is open. Overcoming this mark will allow the price to fall to 1.2447.     To extend the decline, the price will need to settle below 1.2447, with the 1.2307 level as the target. Today's Jackson Hole symposium increases the risk of speculative movements. The market will listen to the Fed's head, Jerome Powell, remarks regarding the central bank's monetary policy.     On the four-hour chart, the price has settled below 1.2614, and the Marlin oscillator shows an intention to turn around as it approaches the oversold territory. Possibly, before the speeches of the symposium's key figures, the pound will consolidate.    
GBP/USD Analysis on 30-Minute Chart: Sideways Channel and Trading Signals

GBP/USD Analysis on 30-Minute Chart: Sideways Channel and Trading Signals

InstaForex Analysis InstaForex Analysis 25.08.2023 09:55
Analyzing Thursday's trades: GBP/USD on 30M chart     On Thursday, the GBP/USD pair fell to the lower band of the sideways channel, and this time the pair seems set to break through it. The pound sterling has already consolidated below the 1.2620 level, but it is still relatively weak. Nevertheless, the fact that even after the pair rebounded from this level on Wednesday, it did not aim for the upper band of the channel but returned to the lower one, indicates a possibility of bringing back the downtrend and an exit from the consolidation phase. There were two reports that could influence the pair's movement. Neither was good enough to propel the dollar by 100 points. This is another factor suggesting a potential revival of the downward movement. This is what we're counting on. We certainly don't expect the pound sterling to surge anytime soon. But who knows what Federal Reserve Chair Jerome Powell will reveal to the market on Friday...   GBP/USD on 5M chart Several trading signals were formed on the 5-minute chart. Midway through the European trading session, the pair settled below the 1.2688 level, which should have been taken as a signal for a short position. Subsequently, the price rebounded from this level, surpassed the 1.2653 mark, bounced off it from the bottom, and descended to the 1.2605-1.2620 area. The price did not form a buy signal at midnight, the short positions should have been closed manually. The profit stood at about 60 pips, which is an excellent result. But Thursday's movement was quite commendable.   Trading tips on Friday: On the 30-minute chart, the GBP/USD pair continues to tread within a sideways channel. We're still leaning towards a further decline in the British pound, believing it's currently overbought and unjustifiably pricey. However, the price hasn't left the consolidation phase yet, so there might be a new rebound from the 1.2620 level, which can push the pair's growth. The key levels on the 5M chart are 1.2457, 1.2499, 1.2538, 1.2605-1.2620, 1.2653, 1.2688, 1.2748, 1.2787-1.2791, 1.2848-1.2860. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Friday, there's nothing particularly noteworthy slated in the UK. Investors will be expecting to listen to Powell's remarks in the Jackson Hole symposium.     Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.    
Analyzing Central Bank Statements: Powell vs. Lagarde and Their Impact on EUR/USD and GBP/USD

Analyzing Central Bank Statements: Powell vs. Lagarde and Their Impact on EUR/USD and GBP/USD

InstaForex Analysis InstaForex Analysis 25.08.2023 10:01
While we've understood Federal Reserve Chair Jerome Powell's potential rhetoric, what about European Central Bank President Christine Lagarde's statement? That's much more complicated. The ECB's rate is below the Fed's, yet inflation in the European Union is higher. This single factor suggests that the ECB should agree to additional tightening. However, in recent months, we've repeatedly heard that a pause is needed. A pause doesn't mean the end of the tightening process, but, in a manner of speaking, its final stretch. If Lagarde hints at such a scenario in her speech, the euro will dip even further in the market.     The second crucial factor is the state of the European economy. GDP has been stagnant for almost four quarters, and PMIs keep falling. As a result, every new rate hike will push the European economy into an even deeper hole. It's important for the ECB to maintain a balance between the rate and the economy. Every subsequent ECB meeting is now a mystery. Some members of the Governing Council believe in another rate hike, while others insist on a pause. Lagarde is set to guide the market on Friday. In my opinion, the chances of a dovish stance from Lagarde is much higher. Even if she announces that the current course will be maintained, it doesn't mean all members of the Governing Council will support her stance. From this perspective, the Fed appears to be a more cohesive entity, so the preliminary verdict is as follows: Powell's hawkish stance is more likely, while Lagarde's is "conditionally-hawkish".   This means a further decline for the EUR/USD. As for the GBP/USD, a lot hinges on the 1.2618 mark. A successful attempt to break through it will signal the market's readiness to continue selling, regardless of Powell's remarks in Jackson Hole. Based on all the above, I don't expect the market mood to change on Friday. Both instruments might start forming corrective upward waves, but so far, there are no signs for either. Hence, it's too early to talk about a strong increase in demand for the euro and the pound.     Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite realistic, and with these targets in mind, I advise selling the instrument. The a-b-c structure appears complete and convincing. Therefore, I advise selling the instrument with targets set around the 1.0788 and 1.0637 marks. I believe that the bearish segment will persist, and a successful attempt at 1.0880 indicates the market's readiness for new short positions. The wave pattern of the GBP/USD pair suggests a decline within the downtrend segment. There is a risk of ending the current downward wave if it is wave "d" and not "1". In that case, wave 5 could start from current levels. However, in my opinion, we are currently seeing the construction of a corrective wave within a new downtrend segment. If this is the case, the instrument will not rise much above the 1.2840 mark, and then a new downward wave will commence. We should brace for new short positions.  
Market Insights: Dollar Position Shifts and Central Bank Speeches Drive Currency Trends

Market Insights: Dollar Position Shifts and Central Bank Speeches Drive Currency Trends

InstaForex Analysis InstaForex Analysis 29.08.2023 15:45
The value of the net short dollar position fell by $2 billion to -$14.3 billion over the reporting week, according to CFTC data. Most currencies had minor changes, except for the Japanese yen, which is rapidly being sold off. Furthermore, futures for most commodity currencies, as well as for oil, copper, and gold, went through a bearish correction. This points to growing concerns about a global recession. At the same time, it indicates that the US dollar is currently the market's main favorite, and that it is logical for the dollar to strengthen.   Federal Reserve Chairman Jerome Powell's speech in Jackson Hole did not provide any new information. Powell stuck to his stance, reiterating the message that the US central bank is prepared to continue raising the funds rate if necessary, and that this policy will remain restrictive until there's compelling evidence that inflation is approaching the Bank's 2% inflation target. Powell also remarked that the current restrictive policy will put downward pressure on economic activity, hiring and inflation.   However, he warned that if the economy continues to grow above trend, it could put further progress on inflation at risk and could warrant further tightening of monetary policy. Overall, Powell's speech essentially reaffirmed that the Fed still relies on data and will act cautiously. This week, the market will focus on the US non-farm employment figures, the US ISM Manufacturing Index, China's PMI, and eurozone inflation for August. EUR/USD European Central Bank President Christine Lagarde also spoke in Jackson Hole. Her speech mainly focused on structural changes affecting monetary policy, but without any hints of changing the current ECB strategy. The eurozone inflation report for August will be released on Thursday, where it is expected that inflation will fall from 5.3% to 5.1%, and core inflation will drop from 5.5% to 5.3%. Since the ECB heavily relies on data, this report might lead to a surge in volatility if the figures significantly deviate from forecasts. The net long position for the euro decreased by 0.3 billion over the reporting week, standing at 21.5 billion. Positioning remains firmly bullish. At the same time, the price is still below the long-term average, and there are almost no signs of an upward reversal.   A week earlier, we expected a test of the support level at 1.0830; the euro fell even lower to the channel's lower band at 1.0767. From a technical standpoint, an attempt to build a bullish correction seems likely, with the resistance area being at 1.1010/50. At the same time, we see a downtrend in the long-term period, so the option of a shallow correction followed by an attempt to break down from the correction channel seems plausible, in this case we can expect the euro to move towards the previous local low of 1.0634.   GBP/USD GfK's long-running Consumer Confidence Index increased five points to -25 in August. All five measures were up in comparison to last month's announcement. Even though the overall figure remains sharply negative, hopes for an improvement in household finances are returning to the positive territory.   The Major Purchase Index is up eight points, which is a good thing, as the advance is potentially better news for retailers. However, it simultaneously indicates that inflation deceleration remains uncertain, as a sharp rise in demand fuels price growth and contradicts the Bank of England's plans to reduce consumer demand. Potentially, the situation favors the growth of the UK economy, but it also supports fears that the BoE will raise rates to a higher level than the market expects.   The pound has a chance to revive its growth as soon as the market re-evaluates interest rate forecasts. The net long position for GBP increased by 0.6 billion to 4.7 billion over the reporting week. Speculative positioning is firmly bullish, but the price is also falling. The main reason for such an imbalance is the situation in the debt market, where UST yields have considerably stronger prospects than British bond yields.   In the previous review, we assumed that the likelihood of a bullish correction has increased, but the long-term trend remains bearish. As of Monday morning, this forecast remains valid. The moderate decline that started in July increases the chances of a technical correction, but fundamental markers indicate that the pound will depreciate further. If a correction develops, we see a resistance area at 1.2680/90, where sell-offs may resume. The long-term target shifts lower to the support area at 1.2290/2310.  
GBP/USD Eyes Further Gains as Pound Advances Against Dollar

GBP/USD Eyes Further Gains as Pound Advances Against Dollar

InstaForex Analysis InstaForex Analysis 29.08.2023 15:51
GBP/USD On Monday, the British pound gained 21 pips. This morning, the pound's gains in the first hours of the Asian session alone amounted to the same amount. The price convergence with the Marlin oscillator on the daily chart has finally formed, the pound is aiming for the first target at 1.2684.         Consolidating above this level will open the target range of 1.2799-1.2814 (the peak of August 10th). The MACD line is in this range. On the four-hour chart, the Marlin oscillator is eager to leave the downtrend territory. The price is advancing towards 1.2684. The MACD line is slightly below this level, but is already starting to turn upwards. And when the price goes above the level, this will mean surpassing the MACD line, creating favorable conditions for further growth.       This evening, the US Consumer Confidence Index for August from the Conference Board is expected to fall from 117.0 to 116.0. This provides an external premise for the pound to rise.  
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

US ADP Set to Slow in August: Impact on Markets and Economic Outlook

Michael Hewson Michael Hewson 30.08.2023 09:42
06:00BST Wednesday 30th August 2023 US ADP set to slow in August   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     We've seen a strong start to the week for European markets with the FTSE100 outperforming yesterday due to playing catch-up as result of the gains in the rest of Europe on the Monday Bank Holiday. US markets also saw a strong session, led by the Nasdaq 100 as yields retreated on the back of a sharp slowdown in US consumer confidence in August, and a fall in the number of vacancies from 9165k to 8827k in July, and the lowest level since March 2021.     The sharp drop in the number of available vacancies in the US helps to increase the probability that the Federal Reserve will be comfortable keeping rates unchanged next month, if as they claim, they are data dependent, and that rates are now close to restrictive territory.   This belief was reflected in a sharp fall in bond yields, as well as a slide in the US dollar, however one should also remember that the number of vacancies is still well above pre-pandemic levels, so while the US labour market is slowing, it still has some way to go before we can expect to see a significant move higher in the unemployment rate. Today's ADP jobs report is likely to reflect this resilience, ahead of Friday's non-farm payrolls report. The ADP report has been the much more resilient report of the two in recent months, adding 324k in July on top of the 455k in June. This resilience is also coming against a backdrop of sticky wages, which in the private sector are over double headline CPI.   Nonetheless the direction of travel when it comes to the labour market does suggest that jobs growth is slowing, with expectations for that jobs growth will slow to 195k in August. We also have the latest iteration of US Q2 GDP which is expected to underline the outperformance of the US economy in the second quarter with a modest improvement to 2.5% from 2.4%, despite a slowdown in personal consumption from 4.2% in Q1 to 1.6%.     More importantly the core PCE price index saw quarterly prices slow from 4.9% in Q1 to 3.8%. The resilience in the Q2 numbers was driven by a rebuilding of inventory levels which declined in Q1. Private domestic investment also rose 5.7%, while an increase in defence spending saw a rise of 2.5%.     Before the release of today's US numbers, we also have some important numbers out of the UK, with respect to consumer credit and mortgage approvals for July, and Germany flash inflation for August. Mortgage approvals in June saw a surprise pickup to 54.7k, which may well have been down to a rush to lock in fixed rates before they went higher. July may well see a modest slowdown to about 51k.   Net consumer credit was also resilient in June, jumping to £1.7bn and a 5 year high, raising concerns that consumers were going further into debt to fund lifestyles more suited to a low interest rate environment. This level of credit is unlikely to be sustained and is expected to slow to £1.4bn.     As long as unemployment remains close to historically low levels this probably won't be too much of a concern, however if it starts to edge higher, or rates stay higher for an extended period of time, we could start to see slowdown in both, as previous interest rate increases start to bite in earnest.     In comments made at the weekend deputy governor of the Bank of England Ben Broadbent said he that interest rates will need to be higher for longer despite recent declines oil and gas prices as well as producer prices. These comments prompted a sharp rise in UK 2 year and 5-year gilt yields yesterday, even as US yields went in the opposite direction. This rise came against a welcome slowdown in the pace of UK shop price inflation which slowed to 6.9% in August.     Headline inflation in Germany is expected to slow to 6.3% from 6.5% in July, however whether that will be enough for Bundesbank head Joachim Nagel to resile from his recent hawkishness is debatable. As we look towards European session, the continued follow through in the US looks set us up for another positive start for markets in Europe later this morning.     EUR/USD – rebounded off trend line support from the March lows at 1.0780 yesterday. Still feels range bound with resistance at the 1.1030 area, and a break below 1.0750 looking for a move towards the May lows at 1.0630.     GBP/USD – has rebounded from the 1.2545 area, but the rally feels a little half-hearted. We need to push back through the 1.2800 area to diminish downside risk and a move towards 1.2400.         EUR/GBP – the rebound off last week's 11-month low at 0.8490 has seen a retest and break of the 0.8600 area, however we need to push through resistance at the 0.8620/30 area to signal further gains, towards the 50-day SMA resistance.     USD/JPY – wasn't able to push through resistance at 147.50 and has slipped back. This remains the key barrier for a move towards 150.00. Support comes in at last week's lows at 144.50/60.   FTSE100 is expected to open 28 points higher at 7,493     DAX is expected to open 49 points higher at 15,980     CAC40 is expected to open 21 points higher at 7,394
Strong August Labour Report Poses Dilemma for RBA: Will Rates Peak or Continue to Rise?

Sidelined Sterling: GBP Reacts to Global Trends

ING Economics ING Economics 30.08.2023 09:52
GBP: Unlucky bystander The lack of domestic data releases has left the pound moving merely in line with global dynamics. Yesterday’s drop in the dollar sent Cable above 1.2650, a smaller rally compared to other peers. This morning, GBP/USD is inching lower along with other dollar crosses, although it appears that the pound’s sensitivity to risk sentiment is a bit more limited at this moment. EUR/GBP is the pair to watch today as inflation data in the eurozone are released. The pair broke above 0.8600 yesterday, and signs of resilient inflation in Spain and Germany could see the rally extend to test the 0.8640 100-day MA.   On the UK side, it will be worth watching mortgage approval figures for July along with other credit statistics. Surging rates and declining demand for loans have already triggered a house price correction in the country.
A Bright Spot Amidst Economic Challenges

Inflation Data Analysis: Will Key Numbers Prompt ECB's September Pause?

Michael Hewson Michael Hewson 31.08.2023 10:25
Key inflation numbers set to tee up ECB for September pause?     By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets underwent a bit of a pause yesterday with a mixed finish, although the FTSE100 did manage to eke out a gain, hitting a two-week high as well as matching its best run of daily gains since mid-July. US markets continued to track higher, with the Nasdaq 100 and S&P500 pushing further above their 50-day SMAs, with both closing at a two-week high, for their 4th day of gains.   As we look towards today's European session, the focus today returns to inflation, and more importantly whether there is enough evidence to justify a pause in September from both the ECB as well as the Federal Reserve, as we get key flash inflation numbers from France, Italy, and the EU, as well as the latest core PCE inflation numbers for July from the US.   Over the course of the last few weeks there has been increasing evidence that the eurozone economy has been slowing sharply, with the recent flash PMIs showing sharp contractions in both manufacturing and the services sector. Other business surveys have also pointed to weakening economic activity although prices have also been slowing, taking some of the pressure off the ECB to continue to hike aggressively.   At the last ECB meeting President Lagarde suggested a pause might be appropriate at the September meeting, acknowledging that policy was starting to become restrictive. We've also seen some ECB policymakers acknowledging the risks of overtightening into an economic slowdown, while on the flip side head of the Bundesbank Joachim Nagel has insisted further rate hikes are likely.   Yesterday's Germany and Spain flash CPI numbers for August highlight the ECB's problem, with Spain CPI edging up in August to 2.4% with core CPI slowing modestly to 6.1%. Headline inflation in Germany only slowed modestly to 6.4% from 6.5%.   Today's headline EU flash CPI numbers are therefore expected to be a key test for the ECB, when they meet on 14th September especially if they don't slow as much as markets are pricing. French CPI is expected to accelerate to 5.4% in August while Italy CPI is forecast to slow to 5.6%.   EU headline CPI is forecast to slow to 5.1% from 5.3%, with core prices expected to slow to 5.3% from 5.5%, although given the divergent nature of the various CPI readings of the big four eurozone economies there is a risk of an upside surprise.    The weaker than expected nature of this week's US economic data has been good news for stock markets, as well as bond markets, in so far it has helped to reinforce market expectations that next month's Fed meeting will see US policymakers vote to keep rates on hold.   A slowdown in job vacancies, a downgrade to US Q2 GDP and a weaker than expected ADP jobs report for August appears to show a US economy that is not too hot and not too cold.   Even before this week's economic numbers the odds had already been leaning towards a Fed pause when the central bank meets in September, even if there is a concern that we might still see another rate hike later in the year.   These concerns over another rate hike are mainly down to the stickiness of core inflation which only recently prompted a sharp move higher in longer term rates, causing the US yield curve to steepen off its June lows. The June Core PCE Deflator numbers did see a sharp fall from 4.6% in May to 4.1% in June, while the deflator fell to 3% from 3.8%.   Today's July inflation numbers could prompt further concern about sticky inflation if we get a sizeable tick higher in the monthly, as well as annual headline numbers, reversing some of the decline in bond yields seen so far this week.   When we got the July CPI numbers earlier this month, we saw evidence that prices might struggle to move much lower, after headline CPI edged higher to 3.2%. This could translate into a similar move today with a move higher to 3.3% in the deflator, and to 4.2% in the PCE core deflator.     Personal spending is also expected to rise by 0.7% in July, up from 0.5% in June. Weekly jobless claims are expected to remain steady, up slightly to 235k.       EUR/USD – the rebound off the 1.0780 trend line support from the March lows continues to gain traction, pushing up to the 1.0950 area. We need to push through resistance at the 1.1030 area, to signal a return to the highs this year.   GBP/USD – another day of strong gains has seen the pound push back above the 1.2700 area. We need to push back through the 1.2800 area to diminish downside risk and a move towards 1.2400.       EUR/GBP – the failure to push through resistance at the 0.8620/30 area yesterday has seen the euro slip back towards the 0.8570/80 area. While the 50-day SMA caps the bias is for a retest of the lows.   USD/JPY – the 147.50 area remains a key resistance. This remains the key barrier for a move towards 150.00. Support comes in at last week's lows at 144.50/60.   FTSE100 is expected to open 6 points higher at 7,479   DAX is expected to open 30 points higher at 15,922   CAC40 is expected to open 13 points higher at 7,377  
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US Payrolls Report and Global Central Banks' Monetary Policies

ING Economics ING Economics 01.09.2023 10:17
05:55BST Friday 1st September 2023 A soft US payrolls report could seal a Fed pause later this month   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     After 6 days of gains, the FTSE100 ended the month on a sour note bringing the curtain down on a negative month for European markets, as sentiment soured somewhat on concerns over the outlook for interest rates, and the China recovery story.     US markets also ended a similarly negative month on a downbeat note, although we have seen a shift in some of the negative sentiment in the past few days due to softer than expected US economic data which has brought yields lower and encouraged the idea that this month's Fed meeting will see US policymakers vote to keep rates on hold. This week we've seen the number of job openings for July slow to their weakest levels since March 2021, a sharp slowdown in August consumer confidence, a weaker than expected ADP payrolls report, and a downgrade to US Q2 GDP.     US continuing claims also rose sharply to a 6-week high, suggesting that recent rate hikes were starting to exert pressure on the US economy and a tight labour market. If today's non-farm payrolls report shows a similarly modest slowdown in the rate of jobs growth, then there is a very real sense that we could see further gains in stock markets, as bets increase that the Federal Reserve may well be done when it comes to further rate hikes. At the very least it could go some way to signalling a pause as the US central bank looks to assess the effects recent rate hikes are having on the US economy.     In July we saw another modest slowdown in jobs growth, along with downward revisions to previous months. 187k jobs were added, just slightly above March's revised 165k, although the unemployment rate fell to 3.5%, from 3.6%.     While the official BLS numbers have been showing signs of slowing, up until this week's 177k, the ADP report had proven to be much more resilient, adding 371k in July on top of the 455k in June. The resilience in the US labour market is also coming against a backdrop of sticky wages, which in the private sector are over double headline CPI, while on the BLS measure average hourly earnings remained steady at 4.4% and are expected to stay around this level.       Today's August payrolls are set to see paint another picture of a resilient but slowing jobs market with expectations of 170k jobs added, with unemployment remaining steady at 3.5%, although it is important to remember that whatever today's jobs numbers tell us, vacancies in the US are still well above pre-Covid levels on a participation rate which is also lower at 62.6%.     After the payroll numbers we also have the latest ISM manufacturing report which is expected to continue to show that this part of the US economy is in contraction territory for the 10th month in a row. Before today's US payrolls report, we'll also get confirmation of the dire state of the manufacturing sector in Europe with the final August PMIs from Spain, Italy, France and Germany, with expectations of 48.8, 45.7, 46.4 and 39.1 respectively.     UK manufacturing PMI similarly is also expected to be confirmed at 42.5 and the lowest level since June 2020. Weak numbers here, along with similarly weak services numbers next week will also go a good way to ensuring that the ECB and perhaps even the Bank of England err on the side of a pause when they also meet later this month.     The bar to a pause for the Bank of England appears to be a much higher one, however yesterday's comments from Chief Economist Huw Pill would appear to suggest that the MPC is already leaning towards the idea that monetary policy in the UK is already restrictive. In a speech made in South Africa he said that he preferred to see a rate profile along the lines of a "Table Mountain" approach, in other words keeping them at current levels, or even a little higher for a lengthy period of time. The contents of the speech appeared to suggest that while inflation levels remained elevated, there was an acknowledgement that a lot of the recent rate hikes hadn't yet been felt, raising the risk of overtightening, and that monetary policy was already sufficiently restrictive. This would appear to suggest that a consensus is growing that the Bank of England could be close to the end of its rate hiking cycle, with perhaps one more at most set to be delivered in September.     There also appears to be an increasing debate over the sustainability of the current 2% inflation target as being too low given current levels of inflation, with arguments being made for increasing it to 3% or 4%. The 2% target has been a key anchor of central bank monetary policy over the last 30-40 years, and while it has served a useful purpose in anchoring inflation expectations some are arguing that trying to return it to 2% could do more harm than good.     That may well be true, but there is also the argument that in moving the goalposts on the current inflation target now sends the message that central banks are going soft in getting inflation under control, and that rather than return it to target over a longer period, it's easier to move the goalposts.     This comes across as unwise particularly in terms of timing. The time to have moved the inflation target was when inflation was below or at 2%, not while it is miles above it. Optics are everything particularly when inflation is well above target, with central banks needing to send the message that inflation remains their number one priority, and not water down their long-term commitment to it because it's too hard. The time to discuss a change of a target is when that target has been met and not before. Once that happens in perhaps 1-2 years' time the discussion on an inflation target, or an inflation window of between 1.5% to 3.5% can begin.       EUR/USD – the retreat off the 1.0950 area this week has seen the euro slip back with the 1.0780 trend line support from the March lows coming back into view. We need to push through resistance at the 1.1030 area, to signal a return to the highs this year. Below 1.0750 targets 1.0630.     GBP/USD – pushed up the 1.2750 area earlier this week but has failed to follow through. We need to push back through the 1.2800 area to diminish downside risk and a move towards 1.2400.         EUR/GBP – having failed at the 0.8620/30 area earlier this week has seen the euro slip below the 0.8570/80 area. While the 50-day SMA caps the bias is for a retest of the lows.     USD/JPY – the 147.50 area remains a key resistance and remains the key barrier for a move towards 150.00. Support comes in at last week's lows at 144.50/60.     FTSE100 is expected to open 16 points higher at 7,455     DAX is expected to open 50 points higher at 15,997     CAC40 is expected to open 21 points higher at 7,335
European Markets Await Central Bank Meetings After Strong Dow Performance

European Markets Await Central Bank Meetings After Strong Dow Performance

Michael Hewson Michael Hewson 04.09.2023 10:47
European markets set to open higher after Dow posts best week since July  By Michael Hewson (Chief Market Analyst at CMC Markets UK)     The August jobs report was one of those reports which had something for everyone, which perhaps explains the rather bizarre market reaction to last Friday's numbers. Bond yields, as well as the US dollar slid back sharply in the aftermath of the report, however those losses proved to be short-lived, as the US dollar rebounded, and yields finished the day higher. On the headline number the jobs report for August beat expectations, coming in at 187k, however the unemployment rate rose from 3.5% to 3.8%, although part of that can be explained by a rise in the participation rate to 62.8% from 62.6%, putting US worker participation in the workforce at its highest level since the US economy reopened after Covid.     We also saw sharp revisions lower to both the June and July payrolls report, with July revised down to 157k from 187k, while June was revised down from 209k to 105k. Wage growth was also softer at 4.3% pointing to a welcome slowdown as far as the Federal Reserve is concerned when it comes to the narrative surrounding the US economy.     From the Fed's point of view this is exactly the type of report they would have wanted to see to justify keeping monetary policy unchanged this month. If that trend continues, and there's no reason to suppose it won't then it's quite reasonable to assume that we could well have seen the last of Fed rate hikes for this economic cycle.     This means that the narrative will soon shift to when we can expect the first rate cut, although the late rebound in the US dollar on Friday somewhat runs contrary to that interpretation. The rebound in yields is probably easier to explain given that they still finished the week quite a bit lower, with the US 2-year yield finishing the day higher, even as it closed below the lows of the last two weeks.   In any case the August jobs report helped round off a positive week for US markets, while European markets also finished higher, despite undergoing a Friday decline.     This divergence appears to suggest that investors have more confidence in the resilience of the US economy in the short term, than in Europe, where the economic data is much less impressive. With US markets off for the annual Labour Day holiday today is likely to be a relatively quiet day for European markets, even as we get set for a period of important central bank rate meetings starting this week with the RBA tomorrow and the Bank of Canada on Wednesday, although we can look forward to a positive open, after Asia markets rallied on optimism over further measures by China to help its property market.     Both central bank meetings this week should set us up for3 weeks of policy stasis on the central bank front with the ECB next week, and the Federal Reserve, SNB, Bank of England and the Bank of Japan the week after, although in the BOE's case the decision is slightly tilted towards one more hike.     We also have the August services PMIs tomorrow which are expected to point to a weakening services sector in both Europe and the UK, thus making further rate hikes a risky endeavour on the part of the ECB and BOE.       EUR/USD – slid back to August lows at the 1.0760/70 area, and the trend line from the March lows. A break of the 1.0750 area potentially opens up a move towards the 1.0630 level. Resistance remains back at the highs last week at 1.0945.     GBP/USD – having failed to push above the 1.2750 area last week, the pound has slipped back with the next support at the August lows at 1.2545.  We need to push back through the 1.2800 area to diminish downside risk and a move towards 1.2400.         EUR/GBP – having failed at the 0.8620/30 area last week we've seen the euro slip below the 0.8570/80 area. While the 50-day SMA caps, the bias is for a retest of the lows at 0.8500.     USD/JPY – slipped back towards the support area at 144.50 before snapping back sharply on Friday. The 147.50 area remains the key barrier for a move towards 150.00. Support comes in at last week's lows at 144.40/50.     FTSE100 is expected to open at 7,464     DAX is expected to open at 15,840     CAC40 is expected to open at 7,296
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Services PMIs Confirm Contraction, RBA Holds Rates: Market Analysis for September 5th, 2023

Michael Hewson Michael Hewson 05.09.2023 11:35
06:15BST Tuesday 5th September 2023 Services PMIs set to confirm contraction, RBA leaves rates unchanged  By Michael Hewson (Chief Market Analyst at CMC Markets UK)     European markets struggled for gains yesterday in the absence of US markets, as the initial boost of a China stimulus inspired rally in Asia faded out, even though basic resources outperformed. This late weakness in the European day looks set to continue this morning.      The day began brightly when Asia markets rallied on signs that China's recent stimulus measures were helping to boost the property sector, after a jump in China home sales in two major Chinese cities helped to propel the Hang Seng to 3-week highs. This followed on from the Friday boost of a US jobs report, which added to the argument that the Federal Reserve would be able to keep rates on hold when they meet later this month.     The return of US markets after yesterday's Labour Day holiday should offer a bit more depth to today's price action in Europe with the focus today set to be on the services PMIs for August, after the RBA left Australian interest rates unchanged at 4.10% earlier this morning, and the latest Chinese Caixin services PMI slipped back to its weakest this year at 51.8. No surprises from the RBA keeping rates on hold for the 3rd time in a row, with little indication that rates will be cut in the future, with the central bank insistent that inflation remains too high, and that it will take until late 2025 for prices to return to the 2-3% target range.     For most of this year it has been notable that services PMIs on both sides of the Atlantic have managed to offset the weakness in manufacturing in the form of keeping their respective economies afloat. The strength of services has been a major factor behind the hawkishness of central banks in their efforts to contain inflation with prices and other related costs proving to be much stickier than other areas of the economy, due to high levels of employment and tight labour markets.       In the last couple of months there has been rising evidence that this trend has started to shift with the August flash PMIs from Germany and France seeing a sharp drop off in economic activity. This weakness translated into a sharp slide in services sector activity in both France and Germany during August to 46.7 and 47.3, with Italy and Spain also set to show a similar slowdown, although given the size of their tourism sectors they should be able to avoid a contraction, with Italy expected to slow to 50.4 and Spain to 51.5.     Today's numbers could well be the final piece of the puzzle when it comes to whether the ECB decides to pause its rate hiking cycle, even as August inflation saw an unwelcome tick higher. Further complicating the picture for the ECB is the fact that PPI has been in negative territory for the last 3 months on a year-on-year basis and looks set to slide even further into deflation territory in July. On a month-on-month basis we can expect to see a decline of -0.6% which would be the 7th monthly decline in a row. On a year-on-year basis prices are expected to fall by -7.6%.   On the PMI front the UK services sector is expected to confirm a fall to 48.7 from 51.5 in June, in a sign that higher prices are finally starting to constrain consumer spending.     EUR/USD – holding above the August lows at the 1.0760/70 area for now, as well as the trend line from the March lows. A break of the 1.0750 area potentially opens up a move towards the 1.0630 level. Resistance remains back at the highs last week at 1.0945.     GBP/USD – currently holding above the support at the August lows at 1.2545, after last week's failure to push above the 1.2750 area. We need to push back through the 1.2800 area to diminish downside risk or risk a move towards 1.2400, on a break below 1.2530.         EUR/GBP – the bias remains for a move back towards the August lows at 0.8500, while below the 0.8620/30 area, where we failed last week. We also have resistance at the 50-day SMA, and while below that the bias remains to sell into rallies.     USD/JPY – having found support at the 144.50 area on Friday, the bias remains for a return to the 147.50 area. A break above 147.50 targets a move towards 150.00. Below support at 144.50 targets a move back towards 142.00.     FTSE100 is expected to open 22 points lower at 7,430     DAX is expected to open 34 points lower at 15,790     CAC40 is expected to open 12 points lower at 7,267  
European Markets Face Headwinds Amid Rising Yields and Inflation Concerns

European Markets Face Headwinds Amid Rising Yields and Inflation Concerns

Michael Hewson Michael Hewson 06.09.2023 11:51
05:40BST Wednesday 6th September 2023 Higher yields set to weigh on European open   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     European markets fell for the second successive day yesterday, as weak services PMIs for August, along with concerns over sticky inflation briefly pushed the FTSE100 and DAX to one-month lows. With oil prices jumping to their highest levels since November after OPEC+ extended their production cuts into the end of the year, there is increasing concern that the rise in oil prices that we've seen since June, will put a base under the recent slowdown in prices, and keep inflation at elevated levels for longer.   This fear is being reflected in a sharp rise in bond yields on both UK gilts and US treasuries yesterday, with the US dollar also rising to 6-month highs. The rise in yields and oil prices also serves to complicate the challenge facing central banks in their battle to bear down on inflation and drive it back towards their 2% target rate. The rise in yields also pushed US markets lower on the day and looks set to translate into a lower European open.     Now that the malaise that has affected the manufacturing sector for all this year has spread to the services sector, the US economy appears to be setting itself apart from the rest of the world, with today's services data expected to show a more resilient consumer. Both the August PMI and ISM numbers are expected to show that the sector is in expansion territory at 51.2 and 52.5, respectively. Before that we get the latest German factory orders for July which are expected to see decline of -4.3% while EU retail sales are expected to decline by -0.2%. The latest UK construction PMI for August is also set to slip into contraction territory from 51.7 in July to 49.8.   Yesterday the RBA kept rates unchanged at 4.10% signalling little indication that rates would be going lower in the near future. The central bank was insistent that inflation remains too high, and that it will take until late 2025 for prices to return to the 2-3% target range.     Today, attention shifts towards the Bank of Canada, and the likelihood that they will do the same as the RBA in leaving rates unchanged as well as keeping their options open for the rest of the year. Since the Bank of Canada last raised rates back in June, the headline rate has remained at 5%. At the last set of jobs numbers, the Canadian economy saw a net decline of -6.4k jobs, with most of those jobs lost being part-time in nature.     The unemployment rate edged up to 5.5% and to its highest level since January 2022. With wage growth at 5% and the economy growing at 0.3% in June the increase in rates does appear to be slowly acting as a brake on the Canadian economy with consumer spending slowing to stall speed over the last couple of months.     With the central bank saying that inflation is unlikely to return to target until 2025, no changes are expected today with rates staying at 5%.     EUR/USD – slipped below the August lows at the 1.0760/70 area sliding below trend line from the March lows, the break of 1.0750 area opening a move towards the 1.0630 level. Resistance remains back at the highs last week at 1.0945.     GBP/USD – slipped below the August lows at 1.2545, opening the risk of a move towards the 200-day SMA just above the 1.2400 area. For this to unfold we need to see a move below the 1.2520/30 area. Resistance at last week's highs at 1.2750.         EUR/GBP – continues to drift lower, despite a brief move to the 0.8570/80 area. The bias remains for a move back towards the August lows at 0.8500, while below the 0.8620/30 area.     USD/JPY – remains on course for the 150.00 area, having moved above the 147.50 area yesterday. Only a move below last week's low at 144.50 targets a move back towards 142.00.     FTSE100 is expected to open 26 points lower at 7,412     DAX is expected to open 28 points lower at 15,743     CAC40 is expected to open 26 points lower at 7,228
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GBP at Crossroads: BoE Governor Andrew Bailey's Upcoming Address

ING Economics ING Economics 06.09.2023 12:22
GBP: Look out for BoE Governor Andrew Bailey at 3:15 pm CET Sterling is coming under pressure against the strong dollar and marginally outperforming the pressured euro. High wage growth looks to be the primary reason for the market retaining expectations of a further 57bp of Bank of England (BoE) tightening in this cycle – making pivotal next Wednesday's release of the average earnings figures for July. Our base case is one more 25bp hike from the Bank on 21 September and then a prolonged pause. The manufacturing slump in the eurozone and these high energy prices suggest EUR/GBP can trade at the lower end of that 0.8500-0.8600 range into that BoE rate meeting on 21 September. GBP/USD looks more vulnerable to a firm test of 1.2500 psychological support.  
Turbulent Times: EU and China Service PMIs Raise Global Growth Concerns, UK Services PMI Improves, GBP/USD Faces Bearish Breakdown

Turbulent Times: EU and China Service PMIs Raise Global Growth Concerns, UK Services PMI Improves, GBP/USD Faces Bearish Breakdown

Ed Moya Ed Moya 06.09.2023 13:15
EU and China Service PMIs drive global growth concerns UK Final Services PMI revised higher but downward trend remains Fed’s Waller (hawk) says “There is nothing that is saying we need to do anything imminent anytime soon.” GBP/USD (daily chart) as of Tuesday (9/5/2023) has made a quick and strong breakdown below multiple support levels, indicating a potential bearish breakdown could target the 38.2% Fibonacci level, which resides at 1.2072.  A bearish near-term outlook has been in place over the past month on the decline of both the longstanding bullish support trendline that was in place since last October and below the 50-day SMA.  Price action is currently trading below the 100-day SMA and if downside continues, could target the 200-day SMA at 1.2421. Upward UK PMI revisions The British pound pared losses this morning after UK services data came in better-than expected, outperforming what came from the Eurozone and following the downbeat readings from China.  The UK service sector is still in contraction territory, standing at 49.5, but it did buck the trend we saw with the rest of Europe. While the service reading was revised higher from a preliminary reading of 48.7, the downward trend that started in April remains firmly in place. Central bank expectations Slowing global growth concerns are sending rate hike expectations lower across the board.  Fed fund futures now are only pricing in a 6.8% chance of a rate hike at the September 20th meeting and the November 1st odds are currently at 37.2%. The ECB rate hike odds for the September 14th meeting are now at 25.5% and the October 26th meeting has a 25.8% expectation for a rate increase. Both the BOE and Riksbank are the only central banks (advanced economies) that are close to fully pricing in rate increases at their respective September policy decisions.  The BOE appears poised to deliver two quarter-point rate increases as financial markets price a 97.6% chance of an increase at the September 21st meeting. Short-term drivers The GBP/USD pair reacted positively to Fed’s Waller’s comment that the data doesn’t say we need to do anything imminent.  Waller is considered one of the more hawkish Fed members, so this comment could help convince markets that the Fed is likely done raising rates. It appears that global sentiment will likely be the primary driver here for the British pound, but dollar weakness could emerge if more Fed officials signal the end of tightening has arrived.  If the UK labor market starts to loosen and household spending softens, BOE rate hike odds could come down and that could also fuel further downward pressure on sterling.  
Oil Price Surges Above $91 as Double Bottom Support Holds

Lower Open Expected as European Markets Decline for the Fourth Consecutive Day, China Trade Shows Modest Improvement

Michael Hewson Michael Hewson 08.09.2023 10:22
Lower open expected, China trade sees modest improvement   By Michael Hewson (Chief Market Analyst at CMC Markets UK) European markets declined for the 4th day in a row yesterday with both the DAX and FTSE100 falling to one-week lows on concerns over slowing economic activity, against a backdrop of rapidly rising oil prices which could act as a long-term headwind for central banks. The initial catalyst was a truly dreadful German factory orders number for July which saw output plunge by -11.7%, the biggest fall since April 2020. When combined with the recent manufacturing and services PMI numbers, which showed further deterioration.     The weakness in European markets also weighed on US markets, which came under additional pressure for an entirely different reason after the latest ISM services report saw economic activity rise to its highest level since February, while prices paid jumped to their highest levels since April, pushing both the US dollar and yields higher, on expectations that even if the Fed pauses this month, we could still see another rate hike in November. Last night's Beige Book showed the US economy grew at a modest rate through July and August, with consumer spending stronger than expected, while today's weekly jobless claims are set to remain steady at 230k.     Earlier this morning we got another snapshot of the Chinese economy, with the latest trade numbers for August. Over the past few weeks China has taken several measures to help boost the prospects for its economy and has continued to do so on a piecemeal basis. From easing overseas travel restrictions to modest cuts to lending rates, recent PMIs have shown that these have had limited success. In July, the economy slipped into deflation after headline CPI fell from 0.2% in June to -0.3%. PPI, which has been in deflation since the end of last year improved slightly but still declined by -4.4%, with the latest inflation numbers for August due this weekend.     This morning's trade numbers for August did show an improvement on the July figures but given how poor these were it was a low bar. Imports declined by -8.8%, an improvement on the -12.4% decline in July, while exports fell -7.3%, which was a significant improvement on the -14.5% seen in July. While this is encouraging, demand for Chinese goods was still weak from an international, as well as domestic perspective. The pound was the worst performer yesterday after Bank of England governor Andrew Bailey gave every indication that the Bank of England might have concerns over further tightening measures, given worries about transmission lags. With Deputy Governor Ben Broadbent and Chief economist Huw Pill also indicating that they think monetary policy is already restrictive enough, the markets could be being lined up for a pause later this month.     With Asia markets also slipping back, European markets look set to open lower, with German industrial production data for July set to show similar weakness as factory orders yesterday, albeit with a more modest decline of -0.4%.      EUR/USD – this week's slide below the August lows has seen the euro slip lower with the May lows at 1.0635 the next target. Resistance now comes in at the 1.0780 area, and behind that at the 1.0945/50.     GBP/USD – remains under pressure with the 200-day SMA the next target at the 1.2400 area. Only a move back above the 1.2630/40 area, and behind that the highs last week at 1.2750/60.         EUR/GBP – squeezed back to the 50-day SMA having found a short-term base at 0.8520 area. We have resistance at the 0.8570/80 area, as well as the 0.8620/30 area.     USD/JPY – remains on course for the 150.00 area, despite a brief sell-off to 147.00 yesterday. Only a move below last week's low at 144.50 targets a move back towards 142.00.     FTSE100 is expected to open 18 points lower at 7,408     DAX is expected to open 45 points lower at 15,696     CAC40 is expected to open 19 points lower at 7,175
Europe's Economic Concerns Weigh as Higher Rates Keep US Markets Cautious

Europe's Economic Concerns Weigh as Higher Rates Keep US Markets Cautious

Michael Hewson Michael Hewson 08.09.2023 12:15
Economy concerns weigh on Europe, as higher rates keep US markets on the back foot By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Yesterday was another mixed bag for European markets, with the DAX closing lower for the 5th day in a row, while still closing well off the lows of the day in another choppy session.  The FTSE100, on the other hand, managed to break a 3-day losing streak, helped by a slightly weaker pound. US markets had a slightly more negative tone to them with the Nasdaq 100 closing lower for the 4th day in a row, with weakness in the Apple share price acting as the main lag on the index, while weekly jobless claims fell to their lowest levels since February.       The overall mood amongst investors does appear to be becoming gloomier, however despite recent price moves we're still within the price ranges we've been in over the past 6 months. With some key central bank meetings looming in the next 2 weeks we might find the catalyst that breaks us out of these choppy ranges. It's been another strong week for the US dollar, set for an eight successive weekly gain, and its highest level in over 6 months as it recovers back to the levels it was just prior to the March regional banking crisis.     One of the main reasons why the US dollar is doing so well is largely down to the performance of the US economy relative to its peers. Recent economic data has shown that the economy remains resilient, so much so that there is a feeling that the Federal Reserve might be able to get away with one more rate hike before year end, probably in November.       The same cannot be said anywhere else with weakness in China, Europe and the UK holding back any prospect of further rate hikes against a backdrop of a deteriorating economic outlook, This change in sentiment has seen the pound and the euro slide back, with the euro slipping below 1.0700 for the first time since June, along with the pound which has slipped below 1.2500. The economic data seen this week, especially from Germany and the rest of the euro area has been extremely disappointing, from some dreadful factory orders data for July, to a sharp downgrade to EU Q2 GDP from 0.3% to 0.1%, which meant that since Q3 of last year the euro area has barely grown at all.     It would take a brave central bank to hike rates further when economic activity is collapsing in one the biggest economies in Europe.   The weakness in the pound has been much more notable as traders pare bets on the likelihood of the Bank of England hiking rates by as much as expected over the coming weeks and months. Judging by recent comments from the likes Governor Bailey earlier this week, as well as deputy governor Broadbent and chief economist Huw Pill at the end of August, there is a sense the market is being softened up for a rate pause later this month, with the narrative likely to be that rates are likely to stay at current levels until 2025 at the very least.     This in turn has seen gilt yields slide across the board, as future rate hike bets get priced out, and investors turn their attention to which central bank might have to cut rates first, with opinion split between the ECB, or the Bank of England.   On the data front it's set to be fairly quiet day, with little way of data on the docket, as we look towards a modestly cautious, but positive European open.   EUR/USD – slipped below the 1.0700 area yesterday, with the May lows at 1.0635 the next key support. Resistance comes in at the 1.0760/70 and the August lows.     GBP/USD – closing in on the 200-day SMA at the 1.2410 area. Below 1.2390 argues for a move towards the 1.2300 area. Only a move back above the 1.2630/40 area, stabilises and argues for a return to the highs last week at 1.2750/60.         EUR/GBP – squeezed back to the 0.8600 area breaking above the 50-day SMA in the process. The 100-day SMA and 0.8620/30 area is also a key resistance. Support lies back at the lows this week at 0.8520.     USD/JPY – had 3 attempts at the 147.80/90 area this week and failed. A break above 148.00 targets the 150.00 area. Only a move below last week's low at 144.50 targets a move back towards 142.00.     FTSE100 is expected to open 7 points lower at 7,434     DAX is expected to open 12 points higher at 15,730     CAC40 is expected to open 5 points higher at 7,201  
AUD Faces Dual Challenges: US CPI Data and Australian Labor Market Statistics

UK Home Prices Drop 4.6% in Year to August, Weakest Since 2009, Adding Pressure on GBP

Kenny Fisher Kenny Fisher 08.09.2023 13:43
UK home prices plunge 4.6% in the year up to August, worst y/y drop since 2009 UK businesses expected to deliver smallest price rise since February 2022 GBP underperforms as BOE rate hike expectations shrink; implied rate peak at 5.699%  vs 5.671% on Sept 1st GBP/USD (a daily chart of which is show) has steadily weakened this month, now falling below the 1.25000 level.  This occurs within the context of a strong accelerated downtrend extending originally from the 1.3140 area highs in July.  The UK inflation outlook is for pricing pressures to continue to ease as business prepare to raise prices at the slowest pace since 2021.  The latest report from the BOE’s Decision Maker Panel (DMP) survey showed one-year ahead inflation expectations improved from 5.4% in July to 4.8% in August.  The three-year outlook improved a tick to 3.2%. With BOE rate hike expectations starting to come down, the focus is shifting to how weak is the economy.  Britain’s residential property market woes are not getting any better as a couple of the top lenders signal prices are falling at the worst pace since 2009.  Questions are growing about how strong the consumer is and if the debt situation will significantly worsen.     Inflation is still too high and that seems to have markets convinced that the BOE will deliver one more rate hike.  D